Despite the ongoing trade disputes around the globe, businesses have increasingly been seeking opportunities overseas. Even for the small business owner, overseas acquisitions can be an exciting and lucrative way to expand your business and opportunities. For those considering an opportunity overseas, the following can serve as a short roadmap for how to prepare.

Why Go Overseas?
For many, the idea of making a business acquisition in another country or another continent is hard to grasp. The fear of the unknown can paralyze even the most open minded business owner. There are many reasons to consider foreign acquisitions including the chance to open new markets, gaining skills or tech or talent in a certain sector or industry, and merely diversifying into available investment opportunities not available at home.

Opening a new market to your business through an overseas acquisition is a quick way to get your foot in the door. Purchasing an existing business or other producing asset can jump start the process of generating revenue overseas. This will be a very important consideration as any capital you employ should be producing as soon as possible. Especially when investing in another country. The benefits of acquiring an existing business overseas are similar to the benefits of a domestic acquisition in that you will have access to known metrics for the business/asset and ability to identify quick improvements for greater revenue growth. While a market or industry in the US may be saturated or mature, often overseas markets will still be growing or even nonexistent. Making an overseas acquisition a way to expand your market footprint beyond a saturated domestic market.

Some acquisitions on the other hand are solely aimed at acquiring skills or tech or talent that may be expensive or unavailable in your home market. Where some new technologies are skills are cost prohibitive in your domestic market, reaching out for an acquisition overseas can give you access to those technologies and skills at a quick and affordable rate. Acquiring these special skills or technologies can be a part of a 21st century vertical integration plan for businesses, where they control the design, build out, and sometimes even the manufacturing of their products. This can be very important in the tech sector where designing and testing your products in house can save many hours and much money in the development process, in addition to protecting the IP of your product.

Some business owners or entrepreneurs merely seek diversifying their revenue streams to other markets. While the world has seen more economic integration globally meaning markets are more likely to enter recessionary and inflationary periods together, diversifying your assets into multiple markets (and ideally multiple sectors) can help insulate you from economic declines in one market. Diversifying into multiple markets and sectors can mean a lot of different things to different people. Sometimes as simple as holding foreign currency accounts for quick access of cash in different markets or as complex as a business purchase in another country. Having producing assets in multiple markets is certainly desirable for most business owners and will help protect your other existing revenue streams from a downturn in your home market.

Steps to Take Overseas
Any successful overseas acquisition will require a trusted team in place and a thorough due diligence review. This is similar to any acquisition in the US, but with the added complexity that you will likely be relying on your team more heavily than you would be used to. Your local acquisition team should include an attorney, a broker, and a banker at a minimum.

A local attorney will be able to counsel you through important legal requirements and regulations. Though it may be surprising to business minded westerners but typical around the world, expect there to be limitations on the ownership of businesses, industries, and certain physical assets. Even in countries with strict limitation on the ownership of businesses, there are very often ways to address this legally with special entity vehicles or partnering with locals. Your local counsel will also help guide you through ongoing compliance which can be very different and comprehensive than in the west. A business broker can be an invaluable asset to help identify opportunities for your acquisition and walk you through the purchase. You will want to retain a broker who is well experienced both in the local rules/customs and the particulars of the industry in which you are acquiring. This can help identify any unforeseen concerns or traps that may not be apparent to the foreign purchaser. A good local banker is self explanatory, suffice to say that everyone needs access to capital and remittances.

Due diligence for a foreign acquisition
Due diligence for a foreign acquisition will track similarly as any other acquisition but will need to be more thorough and complete than any domestic acquisition. We have written quite a bit regarding due diligence in buying a business here ( so I will not duplicate previous thoughts but I will add some tips when overseas.

  1. Be well aware of the capital costs involved with the expected purchase, both upfront capital and ongoing capital necessary. Ongoing capital costs have sunk many well known companies projects when expanding overseas.
  2. Identify and quantify your business expectations. After the acquisition, have a solid plan to make the business profitable and achieve your goals overseas.
  3. Consider logistical issues that may cause delays or costly expenses. If you require specialized equipment or supplies for the business to reach and maintain profitability, will these specialized items be available to you? Will the country have the means to get the items to you? Something easily overlooked for westerners but a huge question for overseas projects.
  4. Lastly, take the time to do it right. Both in regards to the acquisition and the ongoing operations. Do not put yourself in a situation with untenable deadlines. Much of the world does not embrace the work ethic of American businesses.

If your business is expanding overseas or exploring opportunities to do business overseas, get Reidel Law Firm on your team to ensure you and your business are protected. Reach us by the email button below or by calling us at +1(832)510-3292.

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