Emily Christopher, Corporate Finance Assistant looks at the upward trend in international transactions.
Global merger and acquisition activity set a record high in 2018, reaching volumes of US $4.1 trillion. Over 40% of these transactions were deals between foreign companies and domestic firms in the target country. This trend is set to continue despite global political uncertainties.
Even after the EU referendum, international buyers were still attracted to the UK with the total value of inward merger and acquisition activity for the whole of 2018 totalling £71.1 billion. This was a sizeable increase on the value reported in 2017 which totalled £35.2 billion. Perhaps this increase in transactions was a result of the fluctuating exchange rates making UK acquisitions more attractive to overseas investors, or opportunists attempting to secure an operational presence in the UK to serve what would remain one of the world’s largest economies.
There are several drivers which have caused a steady increase in global M&A activity. These include positive global growth, improving cash flows, low cost of debt, investor support and CEO confidence. Another key reason, which underpins all these other factors, is that is it becoming increasingly easier to buy and sell businesses globally. Mergers and acquisitions across different countries have arguably never been easier.
The adoption of the internet around the world in the last twenty years has had an unprecedented impact on society and global commerce. Information is just a click away. Communication is now instantaneous via email or instant messaging regardless of where the recipients are in the world.
This has all made international transactions easier. The use of online data rooms has become an increasingly popular means of securely sharing data to facilitate the due diligence process typically undertaken by the buyers during mergers and acquisitions. Virtual data rooms are quickly replacing physical data rooms due to their cost savings, ease of accessibility by users whenever and wherever they in are the world, and better security of sensitive information.
Finding experts to facilitate transactions in the country where mergers and acquisitions are taking place is also becoming much easier as a result of worldwide networks of professionals who specialise in such transactions. For example, Nexia International which is a leading global network of independent accounting and consulting firms.
It is important to work with trusted advisers throughout the acquisition process in order to receive reliable and robust strategic and financial advice. This is even more important when considering an international transaction. As with any merger and acquisition, proper due diligence is the cornerstone of every transaction.
It is essential that the buyer thoroughly reviews any company before purchasing it. However, with international transactions, some information about a company may only be available in the country which it resides, for example filed company accounts. This is where global networks such as Nexia are becoming increasingly useful in allowing in-country experts, working as an international team, to access and pass on relevant information. Improvement in technology and communication have undoubtedly made the transaction process much easier.
Global mergers and acquisitions have become a significant part of integrating the world’s economies. With the buying and selling process becoming increasingly easier due to improvements in communication and technology as well as access to networks of experts, the number of international transactions is set to continue to rise into the future.