An expected economic downturn doesn’t mean mergers and acquisition (M&A) deals are off the table in 2023.
Even though PwC’s most recent Annual Global CEO Survey found 73% of corporate leaders are pessimistic about global economic growth in 2023, 60% assert that they do not plan to delay deals this upcoming year.
This suggests business leaders are aware that strategic M&A deals can be a linchpin for sustained growth and transformation into the future. In an environment of valuation resets, this moment may be an M&A “sweet spot” for companies with flush balance sheets and a well-developed strategy.
Cross-border deals, in particular, can unlock a myriad of benefits for companies and tackle some of the most pressing market challenges in today’s business landscape.
|Market Challenge||Benefit of Cross-Border M&A|
|Weak revenue streams||Unlock new revenue streams and improve bottom-line profitability by accessing new markets, customers, product lines, etc.|
|Centralized operations can be disrupted by an event (natural disaster, war, geopolitical tensions, act of terror, pandemic outbreak)||Mitigate risks by diversifying operational footprint to different geographies|
|Increased market competition||Achieve economy of scale and economy of scope by combining resources, operations, products, services, suppliers, etc.|
|Supply chain disruptions||Gain access to suppliers in new geography and potentially reduce tariff liability by having operations within the supply chain in trade blocs (e.g. RCEP, EU, APEC, etc.)|
|Talent gaps and skill shortages||Acquire new talent (this type of deal is often called an ‘acquihire’) and gain access to new talent pools in markets abroad|
|Innovation pressures||Obtain intelligence and expertise with the deal, which can prove critical for success in a new market or industry|
Bolster cross-border M&A deals with an Employer of Record (EOR) partner
As Steve Jobs said, “Incredible things in the business world are never made by a single person, but by a team.”
When an M&A deal is on the table, many buying companies find that engaging an EOR partner can help drive teamwork and a successful integration. The success lies in the fact that the EOR model makes global hiring seamless.
When a buying company completes a deal abroad, it may not be familiar with the local labor laws and regulatory compliance requirements. It may not even have a legal entity to employ acquired talent, depending on how assets are distributed during the deal. For example, a carve-out will likely leave ‘orphaned’ workers behind if the buyer doesn’t already have an in-country entity.
An EOR acts as the legal employer of the employees, taking on the responsibilities of complying with local laws, regulations and compliance requirements. This includes processes in payroll, taxes and benefits. By using the legal entity it has already established in the target country, the EOR partner will directly employ workers on behalf of the buying company.
When executed properly, the EOR hiring model can help address compliance issues, bolster employee engagement and support talent engagement during all phases of an M&A transaction – and beyond!
Check out our guidebook “Managing and Engaging Talent through Mergers, Acquisitions and Divestitures” or contact us to learn more about managing talent throughout the M&A lifecycle.