A communicator’s role in the changing face of cross-border M&A

The following is an excerpt from a new communications guide to the changing global landscape of foreign direct investment reviews, created with our international network, AMO. You can read the entire workbook here.

Can you really obtain CFIUS approval?  How long will MOFCOM review take?  Does the Florange Act have an impact here?  What does your BMWi approval path look like?  How will you look in the ICA review?

Beyond being just a seemingly odd set of questions with strange acronyms, the answers to these questions are increasingly important arbiters of success in cross-border transactions.  Global communicators need to understand how to answer these questions and work with an growing array of stakeholders to help successfully guide cross-border transactions to success.

For years the world has grown “smaller” as international commerce increasingly results in global interconnectivity.  Supply chains for almost any product crisscross international lines on their way to the global consumer.

This shrinking effect has unleashed new economic benefits and incredible innovations.  In the last few years, however, the world started to feel the pinch of our globalized economy as governments sought to protect national boundaries.

One of the more profound impacts of this shift has been on cross-border M&A, which has quickly become a target of governments looking to re-assert some control over their sovereignty and protect their homegrown companies and national security.  As a result, in the deal economy, the last two years have been marked by dramatic firsts and significant evolution.

As the global economy undergoes major change, communicators need to be nimble, forward-looking and carefully nuanced when communicating how a cross-border deal can be approved and successfully close.  The right messaging needs to speak confidently about a transaction’s ability to achieve long-term success, while also being tailored to not run afoul of the increasingly stringent and unpredictable political and regulatory processes that dictate their fate.

To understand this changing M&A environment it is helpful to look at a transaction pitting a global behemoth against a regional player.  Recognizing the changing winds, a small Kansas company put cross-border M&A in a new light when it took on the global giant of Ant Financial in launching a competing bid for MoneyGram.  The bid was remarkable because it put the opaque regulatory body known as the Committee on Foreign Investment in the United States (CFIUS) at the center of its bidding strategy.  While the Kansas company ultimately lost the bidding war, by proactively questioning Ant’s ability to secure approval from CFIUS the plucky Kansans were able to eventually thwart a competing bidder from buying a rival based solely on national security concerns.

The deal was an early signal that underlying global tensions would increasingly be swept up in foreign investment reviews for cross-border transactions, raising the bar for approvals from Germany to China.

In the last year alone, we’ve seen the stunning block by the United States of Broadcom’s purchase of Qualcomm.  This was followed by China’s block of Qualcomm’s deal for of NXP.  Germany brought Europe into focus when it moved to block State Grid Corporation of China’s acquisition of 50Hertz.

Now governments around the world are not only using existing tools but actively expanding their powers to review foreign M&A making national security reviews a significant hurdle in closing cross-border transactions.

The amorphous, stakeholder-driven nature of foreign investment reviews puts communicators front and center.  Deal structure and value matter, but perception can be king in crossing the finish line.

That means the communicator’s role in securing deal approval has risen once again.  No longer can companies rely strictly on messages of value, structure or process.  The reputation of foreign companies has become a vital tool to successful M&A.  What is your relationship to your home country?  What is your track record in local markets?  Who are your leaders?  Can they be trusted?  Is your company a responsible global citizen?  These are questions that can soothe political concerns or inflame protectionist tendencies.

Early preparation is key to leading an effective and successful process.  This workbook is intended as a practical tool for communicators to understand the standard approval process, the shifting local landscape and what those local stakeholders expect from foreign acquirers.  In this first edition, we have collected a view into eight countries representing some of the world’s largest economies and where we have seen an active dialogue about shifting sentiment on foreign acquirers.

We firmly believe that effective communications allow local realities to drive global planning.  There are some global tips for beginning to build an approach to supporting cross-border M&A.

  1. Know how the process should work. Every stakeholder will want to know a proposed transaction’s path to closing.  Simply being able to articulate that process is key to providing assurance there is a clear path.
  2. Know how the process could work. As norms shift, it is equally important to understand how the standard process could change.  What sorts of political pressures can be applied to impact the outcome?  Can a 90-day review turn into 200 days?  While you can’t anticipate every twist and turn, understanding recent case studies can help create more effective and proactive communications.
  3. Build a story beyond value that is market specific. When governments are looking to assert increased authority, understanding and respecting cultural norms is paramount.  Small slights and misunderstandings can quickly become fuel behind broader patriotic concerns.

Engage, in-person and often.  While every market has different expectations, there is universal truth behind in-person interactions.  Try to build time for your lead executives to meet with community leaders, local media and develop a reputation for engaging with key constituents.

Read more about the approval process and the shifting landscape in many of the international markets we serve in our full workbook, available at amo-global.com.

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