Market News

BLOG: Buying or Selling an Overseas Business

20 May 2020

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.

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

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.

You’ll Need Expert Guidance to mange 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 advice 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.  The buyer would convert the amount of Euro’s in to 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.

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