Challenges of Cross Border Transactions

Software is a global business and often the best buyer may be from abroad. However, cross border transactions carry additional risks and challenges. Buyer and seller may have very different business cultures and practices. Im being reminded of this now in a transaction Im working on. The buyer is Asian and the seller is North American. A lot of patience is required. Fortunately, weve been involved in many cross border deals, but here are just a few things to anticipate.

1.Every decision maker in a multi-billion dollar company has a boss behind him or her, and they must buy in. Approvals are required at each management level, and they must be done in the proper sequence and with the proper preparation and presentation. Ask about the buyers approval process but be patient; it takes a while to jump through all the hoops.

2.Business evaluation and due diligence are more formalized. Every major decision seems to need a written report or whitepaper to back it up. Anticipate this and supply material to support the buyers analysis if you can.

3.When the buyer is not a traditional software company (as in this case) expect that they will have a very different perspective on many things, such as approach to valuation, uncertainty about intangible assets, and concern about intellectual property issues. Plan on more time to educate the buyer and for the buyer to become comfortable with the differences.

4.Even though the buyer is a sophisticated, multi-national company, they may use external consultants to bring local expertise they dont have expertise in software company valuation, expertise in due diligence, expertise in intellectual property matters, expertise in legal matters. Remember that each of those consultants needs to show just how expert they are, and they do so by pointing out problems, either real or potential. Anticipate and prepare to deal with the issues that come up.

Posted by , on 21 April 2009
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