Buying or Selling an Overseas Business:
Exchange rate strategy
If you are considering buying or selling an overseas business, then it is crucial that you gain an understanding of the process and what you should look out for. Buying or selling a business requires detailed planning and expertise, but if you carry out the correct research and follow the correct guidance then you are likely to come out of the situation in a more favourable position.
One of the biggest factors to consider is foreign exchange and the exchange rates at the time of your transaction. Fluctuations in exchange rates can be the difference between a profitable transaction and one that leaves you paying more or receiving less than you should do. There are a number of ways you can help minimise risks on international transactions, including using market orders to prepare and execute the transaction.
Buying and Selling Overseas Businesses:
Risks and considerations
Speak to a specialist at NewbridgeFX to discuss your foreign exchange options when buying a business overseas
Prepare to Overcome the Language and Cultural Barrier
One of the first hurdles to overcome is the one that relates to the language barrier. Purchasing or selling an overseas business will put you in contact with a language you may not be familiar with, either when dealing with the various people associated with buying or selling a business, or once you have taken over the business and are having to communicate with clients and suppliers.
In addition to language, the local culture and customs should also be considered, such as how to greet people, how and when to pronounce names and titles, and the various cultural etiquettes in your target location should all be researched and understood.
Alongside this, different countries have different laws and legislation around working practices and employment, so you need to make sure that your business is able to comply with local legislations and for that we recommend speaking to a local specialist such as an international Tax lawyer to confirm you are able to operate effectively in the chosen country.
Consider the Risks
There are several risks to consider when it comes to investing in a business overseas or selling a business overseas. Different countries take a different approach and this could mean that you have to take the time to consider any unforeseen expenses or delays. You are going to have to consider any political events or announcements that could disrupt the process and could result in you losing money through fluctuations in exchange rates. Along with this, you will also need to ensure that you receive the correct guidance when it comes to tax and what you are expected to pay.
Foreign Exchange Broker:
International Business Payments
You’ll Need Expert Guidance to manage the Foreign Exchange risks
Whether it is buying or selling, it is not advised that you try to go through the process alone. As different currencies are likely to form a crucial aspect of the service, you are going to need to consider the influential factors that can cause exchange rates to fluctuate. Buyers will need to consider how fluctuations will have an impact on the value in their local currency and so, they are going to want to understand how they can mitigate any losses. This is where sound, expert guidance from a Foreign Exchange or International Payments specialist can make a difference.
As an example, if a buyer is based in the UK and is buying a business in Europe, a specific amount of Euro’s would have been agreed for the business purchase.
The buyer would convert the amount of Euro’s into Pound Sterling, and this would be the amount they would expect to pay in their local currency. However, as the deal process can potentially take many months to conclude, the amount of Pound Sterling required to buy the agreed value of Euro’s would have changed.
As a result, it is common to secure the agreed amount of Euro’s through the use of spot and forward contracts. These help to secure the exchange rate to ensure the expected amount of Pound Sterling remains fixed, while allowing the deal process to continue.
That means businesses looking to buy or sell abroad are able to secure a set rate at which the transaction will take place, so both parties are able to prepare any financial requirements in line with the agreed rate rather than being surprised by changes at the final stage.
Depending on the currency and countries involved, exchange rates can fluctuate significantly through the transaction process, so we recommend working with a specialist partner such as NewbridgeFX to determine the best route for your business. Our specialists can help you understand the risks involved when buying or selling a business overseas as well as help you navigate the process so you can be sure you’re getting the best exchange rates possible throughout the transaction. If there are delays or complications throughout the process, our specialists can also assist in explaining and financial implications and the best next steps to help you secure the best transaction rate, no matter when the transaction takes place.
FAQ:
International Business Payments
Answer
Market orders are instructions to a specialist foreign exchange broker, such as NewbridgeFX, to buy or sell currencies at a specific exchange rate that is not yet available in the market. Market order types are either Limit Orders or Stop Loss Orders.
Answer
An instruction to buy or sell currencies at an exchange rate above the current market levels. Useful if you want to achieve a higher exchange rate in the future should the exchange rate strengthen.
Answer
An instruction to buy or sell currencies at an exchange rate below the current market levels. Useful if you want to protect yourself against a downturn in the currency markets, and to budget for the minimum exchange rate you would want to achieve.
Answer
Buy setting a Market Order it is possible to secure a target exchange rate in the future, which allows for better budgeting. By setting a Market Order, NewbridgeFX will watch the currency markets on your behalf and execute the transaction should the exchange rate be achievable. This enables you to focus on your business, without having to check the exchange rates on a daily basis.Answer
Market Orders are not guaranteed. While NewbridgeFX will watch the markets and execute should the target exchange rate be achievable, if the market does not reach the levels set then the market order will remain outstanding. Should this be the case, and the time had come to book a transaction anyway, then you would have to book at the Spot Rate on the day. Should this be the case, and the time had come to book a transaction anyway, then you would have to book at the Spot Rate on the day.Foreign Exchange Broker:
International Business Payments
Understand Cross-Border Deals
Purchasing or selling a business overseas is not quite the same as purchasing a business in your own country. After all, different countries have a different take on laws and regulations. Therefore, if you are purchasing or selling in Europe, you might need to consider cross-border VAT as well as licenses and permits. Cross-border deals come with many obstacles to overcome but that does not mean that the process should be avoided. However, what is required is a clear understanding of the costs and currency fluctuations because ultimately, whether you are buying or selling, you want to come out of the situation in the best possible position.
To discuss how NewbridgeFX can help you when buying or selling an overseas business please don’t hesitate to get in contact
Products:
Manage Risk
NewbridgeFX offers a specialist service in the deliverable foreign exchange market, promoting a range of products and services, available online or over the phone. Our products have been designed to meet the needs of our clients when sending money overseas, and are ways for businesses, and individuals, to manage and mitigate currency risk.
Spot Contract
Lock in an exchange rate for immediate onward settlement. Funds can be received the same day.
Forward Contract
Lock in an exchange rate today, but for settlement at a later date that suits you, up to 12 months in the future.
Market Order
We monitor the markets real time and take action to trade between currencies when your desired rate is achieved.
Rate Alerts
Set an alert for phone or email notification when a rate has been achieved to take advantage at the best time.
Benefits:
NewbridgeFX
Multi-Currency Account In Your Company Name
Receive funds from your customers in to your own named collection account, using one account number for all currencies, or a local in-country account number still in your company name.
Create And Manage All Your Beneficiaries
Add and manage your beneficiaries, perform bank account validation & verification checks as you enter your beneficiary details & bulk upload multiple beneficiaries via a CSV file.
Make Fast & Secure Payments To Over 200 Countries
Real time Swift and local payments are settled the same day, within minutes of processing (currency/country dependant), and payment tracking capabilities allow you to keep updated on the payment status.
Multi-Currency Balances
Hold multiple currencies and access balance information in supported currencies. Receive, convert, send and move money between your multi-currency accounts without making payments.
Convert Over 100 Currencies, 24/7, Using Multiple Devices
We provide informative, up to date market news, including updates on currency movements, upcoming economic events and announcements that impact the foreign exchange market.
Real-time Reporting And Tracking
View and track all conversions, payments and incoming funds using our online platform, and receive email notifications when funds have been received, conversions processed and payments released.