Here, we offer you some tips on how to make a success of an overseas acquisition, whether you are an established business owner looking to expand into a new market, or a first-time entrepreneur in search of a new life and a new business.
Why buy a business abroad?
Firstly, it’s a good idea to examine some of the reasons you might want to purchase a business in a foreign market.
Your preferred niche market is growing abroad, but not at home
All geographic markets have their own idiosyncracies and many industries grow at very different rates across countries. Some markets have reached capacity in terms of organic growth potential. Take the wealth management market in the UK, as an example. Companies must innovate in order to retain or grow their customer base, as this is a relatively static market with few new potential customers appearing each year. Alternatively they can acquire local competitors or expand abroad. Capturing a niche abroad in its infancy does require the ability to move fast, but early mover advantage can bring substantial and long-lasting rewards.
You can take advantage of the macro and micro-economic environment
Ironically it may be a good time to invest in the4 UK right now as asset valuations and the currency are still relatively low. And indeed we are seeing foreign buyers snapping up UK businesses. On the flip side, there are countries and jurisdictions like Hong Kong that present a high level of investment risk right now.
Looking at South East Asia, one can see that Cambodia and Vietnam have recorded annual growth rates of over 6 per cent for the last several years, with no imminent prospect of a slow-down. There are millions of people moving to urban centres and mobile payment services are flourishing, facilitating growth across many sectors.
You are buying a business and an established team
Buying an existing business always has advantages over starting a business from scratch and this is particularly true when moving into a new foreign market. Knowing your are buying a business that has an established customer base as well as an existing team of staff who, presumably, speak the language, know the business, are aware of the working culture and are familiar with how the business works makes success far more likely.
You won’t face as many regulatory challenges
If you were starting a business from scratch in a new country, it’s likely that the regulatory landscape would be alien to you. You may find yourself shelling out thousands in lawyers fees just to ensure you aren’t breaking any laws when starting your business. Buying an existing one gets around this problem from the outset.
It gives you access to a customer base right away
Anyone trying to start a business from scratch in an unfamiliar country will find that drumming up business may be one of the toughest challenges. Providing you buy a business that is doing well in terms of customer numbers, loyalty and reputation, half the job is done for you.
You won’t have to establish infrastructure and suppliers
Setting up your business with respect to establishing suppliers and the infrastructure you will use to operate each day would be a difficult task when starting a new business abroad. However, acquiring an established business solves these problems.
Tips for making a success of your overseas business purchase
Remember to respect existing staff
Put yourself in the position of the existing staff, regardless of local employment regulations, they deserve to be treated fairly when you take over as manager/owner. They are likely to be your best asset, but even if they are not, they may have been treated poorly by the previous owner. Alternatively they may be loyal to the previous owner and resistant to change. Tread carefully here in order to fulfil your new role as manager sensitively.
Consider if you have the right skills to make a success of the business
Before buying a foreign business, it’s time for some self-analysis. Do you have the required skills to enhance the business going forward and will these skills adapt to a new country and culture? Are you experienced in the industry and do you have market knowledge? Will you be able to create synergies with existing business? Do you have clear goals?
Do you speak the language?
If you do not speak the language, all is not lost as you can work alongside translation experts or localisation experts in order to ensure you are hitting the right notes with your local marketing, for example. Avoid language and localisation faux-pas at all costs!
Speak to a local accountant and tax adviser
As soon as you become serious about buying a business abroad, it helps to speak to a local accountant who will be able to look over your finances and ensure you have sufficient funds to meet all the expenses involved in purchasing the business. There may be costs you are not aware of that you may need to put extra money aside for. They should give you an idea of the availability of local funding sources, including bank lending. Get tax advice to give you familiarity with local tax rates, both for the business and for you as an individual.
Visit the business and location in person
This is, perhaps, the most important thing you can do to maximise your chances of success when buying a business in a foreign market. Unless you go there yourself and check things like location, footfall, staff, facilities, building and equipment you may be in for a shock after you’ve parted with your cash.
GetLenses.co.uk was a UK-based contact lens retailer based online, which enjoyed some successful overseas growth as a result of its brave moves to buy foreign businesses between 2012 and 2014. When it decided to expand into Europe, it knew that acquiring businesses with a strong established customer base was the right cultural fit.
It looked first to Spain’s Masterlens, which it purchased in 2012, followed by Vision Direct, which was a Netherlands-based lens retailer it purchased in 2014. The Vision Direct brand name was adopted throughout the group and the acquisition enabled it to add customers from Belgium and the Netherlands to its already strong UK customer base. The acquisition enabled the business to go from a £10 million company to a £25 million business with immediate effect because Vision Direct was, in fact, one of its biggest rivals in the UK.
The practice has been around for over two decades with virtually zero DB transfer exposure and a focus on financial planning. The Practice represents one of the cleanest Businesses you’re likely to see anywhere on the marketplace at this time. Number...
This well-established manufacturer for sale has been trading for over 185 years and has built up a considerable niche business for agricultural and engineering products for a cross-section of industry sectors. The business to be sold is ideal for acq...
Highly Profitable Wealth Management Firm. Great Staff Base Who Will Remain and Continue to Manage the Clients. Established: 25 to 30 years. Number of staff: 5 to 10. Offers invited.
Sign up to receive our acquisition alert emails to get your FREE guide
Business Sale Report is your complete solution to finding great acquisition opportunities.
Join today to receive:
All this and much more, including the latest M&A news and exclusive resources