International business acquisitions are becoming increasingly interesting. Partly due to internationalization, Dutch entrepreneurs are increasingly looking across the border for business acquisitions.
International business acquisitions do not differ much in approach from business acquisitions within the country's borders. Cultural differences seem to make the biggest difference. When getting acquainted, the Dutch immediately ask direct questions regarding takeover. In Belgium, for example, this often takes a meeting or two.
In doing so, in an international business acquisition, knowledge of the local market is essential. Who are the buyers, the suppliers? And what other stakeholders are there? Remarkably, the legal and fiscal differences are actually irrelevant. Transactions abroad are also a personal matter, based on trust.
Case study: growing through international acquisitions
The Flemish company Clear2Pay is an experienced player in international business acquisitions and has reached the world's top. The company, where director-major shareholder Michel Akkermans is at the helm, was founded in 2001 and specializes in software that allows financial institutions to properly manage their payments. For example, the business has developed payment solutions for the Single European Payment Area (Sepa), for the United States and for China.
9 businesses acquired
Meanwhile, Clear2Pay has a whole slew of business acquisitions to its name. 9 to be exact, of which 3 in Belgium, 2 in France, 2 in the Netherlands, 1 in Australia and 1 in China. In 2003, Clear2Pay acquired the Dutch company MaXware Benelux. MaXware Benelux, now known as Clear2Pay Netherlands, provides financial transaction processing solutions to large businesses and financial institutions. In 2009, Clear2Pay strengthened its position in the Netherlands through the strategic acquisition of Ereon, a payments consultancy firm. MaXware Benelux employed 12 people and Ereon just under 10. These were not major business acquisitions, but they were important ones.
Cultural differences not so big
At Clear2Pay, they find that the cultural differences in international business acquisitions are not so bad, especially between Dutch and Belgian businesses. The Dutch way of doing things is quite similar to the Belgian way, according to Akkermans. I think that the story about the cultural differences gets blown out of proportion, and as a result a business acquisition is wrongly called off. You Dutch are a bit more direct, we Belgians are perhaps a bit more diplomatic. But the cultural differences between North Flanders and the Netherlands are often smaller than those between Noorden and South of Belgium.
Akkermans acknowledges that customers in both countries have different expectations. With French-speaking customers you are more likely to find yourself in the restaurant. The lead time to reach agreements or even a business acquisition is similar, according to the ceo. The efforts are more or less equal.
3 criteria when making a business acquisition
Before considering an acquisition, Clear2Pay does an extensive due diligence, says Jurgen Ingels, cfo and co-founder at Clear2Pay. Moreover, it is imperative that we have a good fit with the management team. People are the real assets of a business.
In addition, the business to be acquired is tested on 3 acquisition criteria:
- The business acquisition should broaden the market geographically and increase international capacity.
- The business acquisition service should contribute to our product range. It should complement existing products and techniques.
- The business acquisition must lead to a larger customer base to which we can also sell our own products.
We have a 40% growth rate and are trying to accelerate that further through business acquisitions, says Akkermans. Clear2Pay has grown into a world player in payment software, partly due to the various business acquisitions; number 3 in the market to be precise. In a relatively short time it has also grown into a business with 600 employees.
Always a 100% business acquisition
Every transaction Clear2Pay does, by the way, is always a 100% business acquisition, but always with a very clear long-term strategy for management, says Akkermans. That is, the incumbent, local management gets shares in the holding company in the business acquisition.
Ereon founder Gaston Aussems is now a full member of the management team. Akkermans: The interests must be aligned during the business acquisition. Or as you say in the Netherlands: the noses have to be in the same direction. If local people only have a share in the local company, you get suboptimal decisions.
Organizational obstacles
For him, a good agreement ends the sock, but Clear2Pay then has to deal with much more organizational obstacles. Cfo Ingels: We have found that it is better not to put your own people in the new business. We leave relatively much to the local entities.
According to Ingels, legal and tax issues do form a point of attention in international business acquisitions. Just like the so-called transfer pricing issues. You have to make very good agreements about this between the various entities. We always streamline the method of accounting and reporting as quickly as possible. Standardizing this means that we always have quick insight into how entities are performing.
5 tips for international acquisitions
But how do you buy a business abroad? These are 5 tips for entrepreneurs looking to make a strategic acquisition in another country.
1) Speak the language
For negotiations, it is extremely important that you understand each other thoroughly. Speaking the same language is indispensable for this. Therefore, see if both negotiating partners can speak in the same language, such as English. If this is not the case, do not start the negotiation in your stony English, but hire an interpreter to prevent misunderstandings.
2) Know your culture
The Dutch are known for their sharp tongues. Nothing is hidden and there are quite a few cultures in which this is considered offensive or intimidating. Therefore, familiarize yourself in advance with the culture of the country in which your potential acquisition candidate is located. If you want to avoid offending your business partners, hire a local adviser.
3) Do justice
We have fairly standard purchase agreements in the Netherlands, which are tailor-made for each acquisition. Our purchase agreements can be vastly different from foreign standards. The question is therefore which agreement does justice to the acquisition and how to conclude a legally valid and thorough agreement for both parties. Arrange for a good legal adviser with experience in foreign acquisitions, so that you can do negotiations and the recording correctly.
4) Integrity
The average Dutchman is not very positive about our tax authorities. But if you go across the border, you may still be surprised at how special tax matters are regulated there. First of all, very many countries have a strict hierarchical structure, where the organization operates in a much more formal and less customer-oriented way.
Second, integrity is sometimes hard to find. This can help but also hinder you in your acquisition ambitions. This is not only the case for tax matters, but also for obtaining permits and authorizations, there are sometimes rules that are not always followed correctly. If you want to arrange your tax matters properly and correctly, find a local tax adviser.
5) Know what you are buying
Before any potential acquisition, do solid due diligence so that you are fully informed about the business. This is very common in the Netherlands, but it is actually essential for foreign acquisitions. With proper research, you'll avoid any bodies coming out of the closet after the deal.
