I’ve spent many years working with multinational companies on mergers and acquisitions, and I’ve come to notice a pattern in how things go.
Company wants growth. Company buys a carved-out division of a foreign company. Company finds a compliance partner to do the deal admin. Company takes over the division, entering multiple new markets. Company soon realises compliance isn’t the same everywhere. Company faces a long road to compliance, and potentially even fines and operational bans in a new territory.
It can be heart-breaking to realise that all your hard work, planning, and strategy on the acquisition will amount to naught because you assumed your global HR and accounting functions would be able to tackle statutory accounting in Taipei, or run the right payroll in Paris.
Recent research by TMF Group and Forbes Insights found that although outbound FDI from the US is forecast to fall in 2017, US-based multinationals still see investment outside the US market as central to their corporate growth plans. The developed economies of Northern and Western Europe, as well as Canada, remain the most favoured destinations for investment over the next two years. Emerging markets in South America also remain a destination choice for one-third of companies surveyed.
So to save the heartache and help streamline your M&A deal, make sure you ask any prospective compliance partner the following five questions before signing a contract.
1. What presence do you have on the ground in these countries? Yes, you could get that experience operating from a shared service centre somewhere offshore - but what do you do about those countries that require statutory filings to be handed over in person? In-country operations were important enough for you to buy the new entity, and your service provider should recognise the importance of matching that commitment with in-country personnel.
2. What statutory accounting experience do you have in these markets? Government regulation can be hard to read and even harder to understand; knowing the history of where an Act has come from can help you to gauge the appropriate response for a multinational entity to take for any developments. Wherever you are, the regulatory environment is constantly changing both locally, and globally. In many parts of the world – particularly in Latin America – the only way one can react quickly is to be local.
3. What’s the transition timeline for us to be up and running smoothly? Easy to overlook, this one, especially if you have a transitional services agreement (TSA) in place with the other party to the deal. But my experience has been that acquisitions and/or carve-outs happen quickly, and that whatever the buyer expects to receive by way of the TSA from the seller – the reality is you’ll be lucky if you get half of what you expect. Partnering with a provider that can mitigate that risk with a ready-made capability in your acquired countries, can greatly accelerate your speed to market. The TSA clock starts ticking as soon as the paperwork is signed, and extending the coverage will cost you - a lot. You want your new compliance partner to be ready as soon as possible, and if they need to recruit their own teams or service providers, that transition timeline can run on and on and on.
4. What language capabilities do you have in-house? Translators are a dime a dozen, so this doesn’t really matter, right? Wrong. Native nuances can be missed by translators, but more than that, it’s only when you’ve been trained in the country and in the language that you truly understand those local compliance needs. Make sure nothing is lost in translation.
5. What technology do you use to ensure global oversight of all work? In-country coverage isn’t enough when you’re operating in multiple markets; you need to have an easy way to have view of all operations at all times. Does your service provider have locally compliant financial reporting and payroll systems already in place in each of your countries? Or will your in-house teams spend much of their time, and a significant amount of the integration budget implementing a global ERP and HRIS, while introducing significant risk to the Go-Live schedule?
A global partner with truly in-house global coverage can take the pain out of these questions and get you operating in your new markets seamlessly, quickly, and with minimal fuss. So remember, before you sign any contracts, make sure you question your prospective compliance partner. It could save you time and money - and it could save your business.