Written by Karen Cheung, Vistra Hong Kong
Director, Business Development, Corporate & Private Clients
Through our International Expansion Division, we help our clients ease through the administrative headaches of entering new markets. Vistra itself is now going through a dynamic phase of expansion and we have learnt a few things ourselves that we would like to share with you.
1. Define your goal – Think about what you want to achieve. Are you looking to expand your geographical coverage, product expansion, diversify your business, acquire technology, or get some return on investment? Imagine looking back after you’ve completed the project so you know exactly what outcome you want.
2. Evaluate your risks – Consider everything that could go wrong. Think beyond the traditional financial and due diligence risks: study whether there are any regulations, political or macroeconomic conditions that might make or break your deal. From a more practical but equally important aspect, are there any integration or cultural risks?
3. Become familiar with the transaction process – Be sure to know what is going to happen at every step of the way, and don’t be shy to ask for help. You can avoid surprises if your advisers can tell you how to better approach each type of transaction; good advisers are usually happy to share their knowledge and experience. You may also have experienced people within your teams and within your personal and professional networks who have gone through similar deals. They would surely be happy to share lessons learnt, pitfalls, success tips, etc.
4. Do your due diligence – Have your ‘eyes wide open’. Make sure that you have enough time, and that you define clearly what you need and expect to know. If you have time constraints, prioritise your goals and conduct due diligence on the core elements. The due diligence that you conduct should be helpful to evaluate whether the acquisition is in line with your goals. If time is not a significant constraint, be thorough in the due diligence: financial, commercial, tax, legal, cultural and HR. Experience shows that the more time you spend on due diligence will pay dividends when you start integration.
5. People – Be mindful of the human element. Do you like them? Do they like you? People will likely be an essential element of the acquisition – if they are leaving, you may be losing clients. Will you be disrupting the business with integration matters? Have clear plans on how to integrate the business and communicate these clearly to all parties. You can avoid a lot of uncertainty for staff on both sides since most of the time they want and need to know: 1) whether they still have a job, 2) what their reporting line is; and, 3) where their desk is. Careful planning will avoid talent leakage, or more seriously, theft of property (including intellectual).
And remember, if it sounds too good to be true, it probably is!