M&A Translation Services
We’ve blogged about certified translation services for international mergers and acquisitions. Mergers and acquisitions (M&A) are always challenging – both legally and culturally – as they involve the merging of two distinct company procedures and cultures. When the M&A is international the process only becomes more complex – and not only because of the need for foreign language translations.
The first step is to understand the unique complexities of an international M&A. For example, the necessary data collection, due diligence process and closing process will take more time, effort and money to complete. More so, the level of challenge is generally dependent on the acquirer’s experience and presence in the country where an acquisition is being made. Acquiring across national borders requires the buying firm to understand such differences as political, legal, economic/financial and cultural.
Take, for example, the area of accounting and finance. Standards and best practices differ across countries and the impacts of those differences cannot be overlooked. For a purchaser with multi-national acquisition experience, this may be less of a factor than for a first-time buyer. Regardless, it adds to the time and effort required to conduct one’s due diligence. The human resource function is another area that in a cross border M&A requires an in depth understanding of such potential risk factors as labor laws, health benefit programs, vacation policies, pension plans, national regulations, unions and workers councils, work conditions, local employment restrictions, employment security laws, national and organizational cultures and customs, and language differences and the need for foreign language translations.
So where does one start? Assessing the overall fit with another company can be where executives face the greatest difficulty in the M&A process. It is easy to overestimate the synergies that might result from an M&A transaction and to underestimate the difficulty of assimilating the purchased company into the organization and harvesting the benefits of those synergies. Thus, it is essential to know what you are looking for and how you want to use it. With a merger, the acquired company will be absorbed into the buying company. With an acquisition, it must be decided on whether the purchased company be integrated (and to what extent) or left alone. If integration is the intent, it poses another challenge that is easier said than done. Assuming the potential target to be a perfect fit for deriving synergistic benefits, integration of strategy depends on the vision and the mission of the two organizations. The strategy pertaining to target markets, human resources, information technology platforms, financial systems, accounting practices and many other ecosystem factors must be in sync.
This process alone should narrow down the list of targeted international companies, which then makes the next step, due diligence, more manageable. Due diligence is where much of the information gathering takes place to confirm the fit for the target company in the buying organization’s strategy. The process also typically involves valuation and early-stage negotiations to determine if the two companies are in the same ballpark on valuation. It is during this period that the executives, senior managers and their staff attempt to learn all they can about a target company (or division) so as to better understand the organization’s value, how it operated and performed in the past, how it is likely to operate and perform in the future, and how it will likely fit with the buying firm (determining the synergies).
Unfortunately, during due diligence, the executives of the acquiring firm typically develop only a partial understanding of a target firm. This partial understanding is often accomplished by piecing together information obtained from internal company documents, interviews with key managers, interviews with a sampling of employees, on-site inspection and surveys and/or interviews with key customers. Therefore using external data can help add back some of the missing pieces to the information puzzle. Gathering external data might include talking to ex-employees, surveying or interviewing current and past customers, reviewing SEC and other published data, interviewing former consultants, researching past press releases or articles written about the target firm, and conducting a 5 Forces analysis.
Often, however, obtaining such information requires considerable effort and adds time to already aggressive schedules. For example, if one is conducting interviews with ex-employees and past customers, certified translations will likely be required. Moreover, many owners of small businesses either do not have much of the information requested or can be guarded about revealing it. This is especially true if the buying firm is a larger competitor. In such cases, the negotiation process will have to progress to more advanced levels of commitment (letter of intent, preliminary agreement, non-disclosure agreements) before access to information is provided. Even when historical data is easy to obtain and is acquired during due diligence, it is still impossible to know what the future holds.