How to Merge with a Company in Another Country

International mergers require extra due diligence regarding foreign regulations and corporate culture.

In today's global economy, U.S. domestic corporations want to invest in emerging economies or do business with European partners. Rather than start a business from scratch, companies choose to find a compatible foreign business that is already established in another country with whom they can merge. International mergers can be tricky because of differing corporate cultures, home country regulations and the inability to valuate an entity. Accordingly, to achieve an international merger, it is important to recognize cultural incongruencies and find ways to work through financial and regulatory issues during the merger negotiation phase.

Instructions

1. Retain legal counsel and an auditor. Make certain that you have legal counsel for both U.S. transactions and for matters in the foreign company. The auditor must have expertise in evaluating companies from the foreign jurisdiction where the company will be acquired.

2. Begin negotiations with the owners and managers of the company with which you plan to merge. Negotiations must touch upon key issues such as the valuation of the companies' assets, the fair market value and purchase price of the company and the plan for integrating the two corporate cultures.

3. Conduct a review (due diligence) of the company's books. The auditor should check the financial health of the company and the tax documents and the liabilities, including potential litigation. Legal counsel must review the contracts and other legal obligations to determine what notice must be given to creditors regarding the merger.

4. Prepare all legal documents to consummate the merger. The attorney should prepare all documents and include the purchase price and terms for the merger. All governing authorities should be consulted to obtain approval for the merger.

5. Finance the merger transaction. Arrange financing with investors, government agencies and private banks. Avail yourself of any government or private initiatives to encourage foreign investment in the country.

6. Close the deal. The attorneys will arrange for all documents to be duly signed by the two entities and for the new entity to be formed or for the old entity to change names. Register the newly merged entity with the appropriate authorities in each country and be sure to dissolve any old entities that no longer exist.

References

• Maps of the World: International Mergers and Acquisitions
• All Business: Implementing International Mergers and Acquisitions
• "The Journal of the AIB-SE": Successfully Managing International Mergers and Acquisitions: A Descriptive Framework