The COVID-19 pandemic is critically affecting the world's economies when businesses were already adapting to volatility and uncertainty as a way of life. With the economic outlook and threats of all kinds continuing to test even the most influential organizations, companies face various challenges as they work to find growth and stay competitive. One of the most beneficial ways of growing an existing company is through mergers and acquisitions (M&A).
Few firms throughout the world reach the top without conducting at least a few M&A transactions. The most well-known firms employ professional teams whose only role is to seek out attractive potential acquisitions tells its own story. When implemented well, an active M&A strategy can be a highly productive process for any company. M&A always has and always will be a long-term game. We are now in an environment where more and more business owners feel comfortable taking some calculated risks and driving forward an M&A agenda to build the company's future.
Private equity (PE) expects to see record-level fundraising this year. Even amidst the ongoing COVID-19 pandemic, analysts predict that the PE industry will raise an anticipated—and unprecedented—$330 billion in total capital in 2021. According to a survey performed by Ernst & Young, 49% of global companies plan to acquire in the next 12 months actively, and the majority are looking for assets internationally rather than domestically. A healthy fundraising and active acquisition environment coupled with the existing $1 trillion in disposable capital means excellent news for those looking to grow their business. Interest rates are low, equity markets are high, and investors demand, value, and reward growth. With numerous potential international acquirers with strong balance sheets and strong liquidity, our advice to companies is to look for logical strategic targets, be proactive, and focus on long-term value creation.
The U.S. and the U.K. remain primary centers of global M&A. The U.S. consistently holds the top spot for both domestic and for international M&A. The U.K. regularly ranks in the top three. If you are thinking of growing your business internationally, it is worth noting that M&A is regulated in all countries worldwide and has many advantages. Below are four key benefits of merging with or acquiring another company internationally.
Increase Overall Performance and Diversify Your Portfolio
- In a merger or acquisition, each company can leverage the others' strengths and increase efficiencies. The companies working in synergy create opportunities that would not have otherwise been available to those operating individually.
- A significant advantage offered by M&A is related to a broader range of services or products which can be explored. The new business portfolio can increase and gain access to a larger market share by joining forces.
- International M&A allows access to new markets and a greater reach to more consumers, thus increasing sales. Entering a new market is often considered complex and tedious, but through M&A, a company can save a lot of time and money when entering a new market.
- M&A very well may be the optimal way to turn a long-term strategy into a mid-term strategy. For example, suppose a company wants to enter the South African market. It could build from the ground up and hope it reaches the desirable scale in a targeted time period. Or the company can buy another business, its customer base, distribution methods, and market reputation and benefit from them all upon closing the acquisition.
- In a time of uncertain tax reform, governments across the globe offer tax reductions at the time of a merger or acquisition.
- For example, a growing trend of U.S. pharmaceutical companies are exploring acquiring smaller Irish companies and moving their headquarters to Ireland to avail of its lower tax base is a case in point. This is referred to as a tax inversion deal.
- M&A represents growth for both companies involved in the transaction. Furthermore, it will mean more financial power from the revenue generated by pooling both businesses' incomes. As a chain reaction, possessing greater financial power will also mean owning a larger market share and having significantly more influence over customers by reducing the competition.
Successfully navigating the purchase of a foreign company requires expertise and a skilled partner that thoroughly understands the intricacies and dynamics of global business. Benchmark International's global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $7B across various industries worldwide. With decades of global M&A experience, Benchmark International's deal teams, working from offices across the world, have assisted hundreds of owners with achieving their objectives and ensuring the continued growth of their businesses.
Transaction Support Associate
T: +1 (813) 898 2350
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $7B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 14 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.