6 February 2025
In Translink Corporate Finance’s 2024 Megatrends Report, our experts predicted that cross-border dealmaking would bounce back once global markets had started stabilising. We’re seeing this forecast come to fruition. As macroeconomic factors return to some semblance of normal, cross-border deals are on the rise.
Translink Corporate Finance UK Partner Kevin Davies has shared some areas to consider before crossing the border.
Factors driving uptick in cross-border deal activity
Stabilisation in the global macroeconomic environment through 2024 has certainly boosted confidence amongst both buyers and sellers, leading to an increase in cross-border deal discussion and activity. Whilst the geopolitical situation continues to change on an almost daily basis, inflation rates in major Western economies have been normalising, fostering a more predictable environment.
This has in turn given central banks the lever they needed to start reducing interest rates, providing the opportunity for cheaper capital for both corporates and private equity. At Translink Corporate Finance, we are experiencing buyers’ confidence building in wanting to explore opportunities beyond their home markets.
Whilst a distant memory for most, the impact of the pandemic remains a catalyst for change. Many shareholders of family-owned businesses realised the vulnerability of their concentrated wealth, and are now more inclined to diversify their assets, providing greater opportunity for acquisitive buyers. This shift in mindset among sellers is mirrored by buyers, who have been seeking to spread their risks across various markets and sectors. This continued drive for both diversification and risk mitigation has been a significant factor in the uptick in deal activity.
From a UK perspective, with the cultural and language similarities we have with the US it remains the most active market from an international M&A point of view. Growing UK entities see opportunity to get access to the huge North American market, and acquisitive US corporates are identifying attractively priced UK assets, particularly in TMT, healthcare and energy transition sectors, giving them a launch pad for a wider European play. At Translink CF we have had recent experience of this with the acquisition of AUS by Georgia-headquartered Osmose Utility Services. A newly installed Trump administration, whilst adopting an isolationist standpoint, is unlikely to dampen these dynamics.
The Private Equity arena is also playing a dominant role in cross-border deal activity, particularly in Europe, buoyed by cash reserves and reducing interest rates. Mid-tier corporates looking to expand into new geographies are seeking attractive “platform” assets in niche sectors, the Translink Corporate Finance advised on the acquisition of façade remediation specialist Clear Line by Stockholm-based Fasadgruppen being a case in point.
Globally, the macroeconomic environment has been stabilising, despite geopolitical uncertainties which have become something of a ‘new normal’. As the world acclimates to this, we’re seeing increasing interest from both buyers and sellers in achieving their strategic aims through cross-border M&A activity.
Key considerations before embarking on cross-border deals
The number one question for anyone considering a cross-border deal is ‘what’s the end goal?’ From an overall business, strategy, and commercial point of view, what are you trying to achieve? And will this cross-border deal get you there?
Each situation will have its own unique set of circumstances, but there are common themes that we see:
- Strategic objectives: Having a clear understanding of the strategic goals is paramount. Companies need to define what they aim to achieve and how this supports their overall vision before contemplating a transaction — be it market expansion, diversification, or acquiring new technologies or capabilities.
- Cultural fit: A strong cultural fit is key. Early assessment of cultural compatibility between the entities is critical. This includes understanding the working styles, management personalities and philosophies, and operational approaches of the prospective partners. A good cultural fit facilitates a smoother integration and ongoing cooperation.
- Regulatory environment: Legal and regulatory frameworks differ enormously across jurisdictions and are constantly evolving. It’s essential to understand these using experts in relevant jurisdictions for support and guidance. This could include compliance requirements, tax regimes, competition rules, or potential restrictions on foreign investments. By way of example, the wider geopolitical situation has resulted in governments, the UK included, tightening regulations around national security, particularly in sensitive sectors like technology, energy security and defence. Issues such as this need early identification and review
- Market stability and geopolitical risks: Understanding the economic stability and geopolitical landscape of the target market is crucial, which as noted above can frequently fluctuate. We’ve experienced international trade policies, and customer and supply chains, as recent live issues in transactions, which need careful navigation and can significantly impact the success of a cross-border deal.
- Diligence process: Conducting thorough due diligence is key, which now often extends beyond the traditional work streams of commercial, financial and legal into understanding areas such as the technology and insurance environments, and crucially, the working dynamics and personalities amongst key members of the leadership team. This should inform the strategic, post-completion planning, as much as the decision making through the transaction.
- Funding: Experience dictates that early conversations with financial sponsors and funders is critical. Getting their “buy-in” to the process, and confidence that there has been a rigorous thought process and preparation that aligns with the overall strategic goals can be critical. This in turn makes more detailed discussions around deal structure, due diligence and post-transaction planning much easier.
- ESG integration: Increasing numbers of buyers are prioritising targets that demonstrate strong ESG credentials, with sustainable practices and appropriate levels of governance
The value of an advisor
Translink’s experience of hundreds of successful mid-market transactions, across the globe, tells us that having experts located in the geographies in which the discussions are taking place is critical to their success. An understanding of cultural norms and the ability to navigate any potential language barriers between buyers and sellers has proved invaluable time and again.
Couple this with an advisor’s ability to remain calm and keep on top of the multiple, and often complex, strands of a cross-border deal. This helps bring clarity of thought and gives clients confidence in taking the difficult decisions, through what can be challenging processes.
At Translink Corporate Finance our experts get the deal done. We act as a steadying influence in ensuring that all aspects of the deal are meticulously managed and that the client’s interests are always prioritised. This includes maintaining a clear overview of the transaction, steering negotiations, and facilitating communication between all parties involved.
Cross-border deal making in the mid-market is getting pushed back up the agenda. The decision-making involved is often a delicate balance of understanding financial and market trends, evaluating risks, and crucially the ability to navigate the cultural nuances of negotiating and executing a transaction in an unfamiliar geography. Businesses that approach these transactions with a clear strategic vision, thorough preparation and the support of experienced advisors will reap the rewards.
