How to Handle Global M&A

From M&A advisory to corporate development

I still have many friends in M&A advisory. The main difference when I talk to them, now in more senior roles, is your principle. In my role, daily I'm in situations where decisions need to be taken. In many cases, people will look at me for those decisions. 

Often, as part of a team informed by different experts, but ultimately as an advisor, you don't need to make decisions. 

You need to recommend and do it to the best of your knowledge, but you're not going to be around when the acquisition is done, when the integration is in progress, and when all the benefits we hope to achieve through the acquisition will hopefully become a reality, and sometimes not.

As a principal, you're not just a decision-maker; you're a key player in the strategic evaluation process. You need to make decisions and be comfortable taking them, and you're involved much earlier in the M&A process and much later. 

You're part of the strategic evaluation process, which gives you much more context to an acquisition. You see it coming much more, and you're also part of the integration. Accountability. Exactly. That's the word.

Executing M&A in the public environment vs private

There are a couple of differences. One that comes to mind is confidentiality around M&A. In a stock-listed company, you have a much stricter, much more mature framework for protecting confidentiality. 

Back at Kuehne + Nagel, we used to have defined rules of engagement, such as who could be involved and who could be in the know. The need-to-know principle was adhered to much more closely and strictly.

There were rules around when a potential M&A would have to be disclosed, processes in place for how to react if there was leakage of information, etc. That's one of the differences. 

The other difference is in the maturity of the organization as a corporate body. Here, we're in an environment that, partially or mainly due to the pandemic, experienced a very fundamental near-death experience two and a half or three years ago. 

During the pandemic, the company had to let go of the biggest portion of its staff. Most of the management team and a lot of know-how were lost during that time. We had to hire 30,000 people in one year in the 12 months post-pandemic. This required us to rebuild part of the organization.

This is not necessarily directly related to the fact that it's not stock-listed, but it's a much more entrepreneurial, much more dynamic environment here.

Challenges of executing global M&A deals

It's probably the most rewarding part of my job. If people ask me what I enjoy the most, it's this diversity of situations that M&A inherently offers. Many of your listeners would agree. 

Adding a global dimension where you inevitably face challenges every time you enter a new market or do a deal in an unfamiliar environment is a unique experience that challenges you in a different way. 

I enjoy that. I enjoy traveling, as long as it's not too much, seeing the world, and getting to know new situations. That's how I approach it, and overall, it is an opportunity to grow as a person.

Regarding the challenges, global organizations are typically experienced in managing situations where the cultural context of your counterpart is different from your own. Despite being in Switzerland, historically, Swiss companies have become quite international in the last 10 to 20 years. 

Swissport is one of them. We're an international company that increases awareness of the complexities you'll encounter in any big project, including M&A.

Having done deals on all continents and in more than 20 countries, you'll always be surprised. Nothing will prepare you for new situations in unfamiliar countries, but your experience in adapting and anticipating complexities helps. This gives you the confidence that, while you'll be surprised, you won't be overwhelmed.

To be as prepared as we can be, the first step is always to try to understand the counterparty's situation. 

• Who is the ultimate decision maker? 
• What's the economic or political context in which the business owner operates? 
• Who is negotiating, and what are their language skills? 
• Do we negotiate in English or not? How experienced is that person in doing M&A? Is it the first time? 
• Is it a private equity owner, a government entity, a corporation, or a family owner? 

We sit down with the full team, which includes people here in Switzerland, on the ground locally, and in the region, and brainstorm to anticipate as many of these complexities or challenges as possible.

Managing cultural differences in global M&A deals

No situation is the same as the previous one. We don't want to use stereotypes, but there are patterns that, over many years in cross-border M&A, help you anticipate reactions to certain statements or actions. If the response is different, so be it, but at least you were mentally prepared and open to thinking about how to react in return.

Talking about these patterns, every situation is different depending on who the seller is—whether it's a family, private equity, or whatever. The differences are generally huge. 

For example, you being from the U.S., I'd say to your listeners in the U.S., which hopefully resonates with them, that I've done several deals in the U.S. and worked on many others that didn't happen ultimately.

One difference is that in the U.S., it's one of the easiest environments to start talking to someone about the potential sale of their company. In many other markets, it's much more difficult to overcome the initial hurdle of getting to know each other and establishing contact. 

In the U.S., I've found it super easy. I've been representing global corporates, which naturally are one of the attractive buyer groups for privately-owned businesses or private equity-owned businesses. Nevertheless, if we reach out or if I reach out to anyone, typically, the feedback in the U.S. has always been super quick.

People are typically open, nice, positive, and constructive. Usually, they're open to hear you out, take an idea back, digest it, and come back within a reasonable timeframe. 

People are generally open to doing a good deal at the right price, which is very different from other geographies where relationships and trust must be built first. It's much less transactional than in the U.S.

Moving on in the deal cycle, once you've established a first dialogue and the counterpart is willing to disclose some information, for example, in Latin America, confidentiality is usually a huge obstacle. 

Negotiating or agreeing on an NDA with Latin American sellers has been one of the more painful experiences. This extends to data room access, where information is available in the data room or needs to be separated into a clean room for your advisors. 

In Latin America, sellers are the most restrictive when it comes to this, which translates into negotiations around non-compete and non-solicitation clauses. The lack of trust materializes in a lot of back and forth around these topics.

Negotiation challenges in the Middle East

If we go to the Middle East, for example, what comes to mind is that in Arabic countries, negotiations are much more emotional compared to Asia. They can be much more confrontational, but I've had the pleasant experience that, despite heated discussions, there can be very positive outcomes.

From the perspective of a Swiss person, or at least 50 percent Swiss as I am, we try to stay calm for as long as possible. We don't like to become emotional necessarily. 

In the Middle East, I've learned to be more aggressive than I would normally be. You don't do that straight away because you want to understand the dynamics on the other side of the table, who is deciding, and who just plays a certain role. But in general, when I go into a negotiation with Middle Eastern counterparts, I go in prepared to be more aggressive. 

We did a few transactions in the Middle East recently. One experience that comes to mind is that it turned into one of the best relationships in the end, but during the negotiations, it would have felt very hostile. 

We were calling each other out, questioning if the other was being solution-oriented, suggesting people leave the room to check if their position aligned with their client's goals. It was quite confrontational, which would be very counterproductive in an Asian environment or even in Switzerland. Some of this is maybe just a bit of theater, but it’s part of the game.

Cultural nuances in Asian M&A deals

In our region, Asia Pacific, there are more Western societies, such as Australia and New Zealand, which are very different. 

My experiences are mostly with Japan, Southeast Asia, and China. When I was at Kuehne + Nagel, we did a few transactions in China. 

China was considered a growth market globally, and we wanted to expand quickly. We did a $1.5 billion acquisition of one of the leading Chinese freight forwarders. That was a unique experience, and we can discuss it more later. It’s a vast and very diverse region within itself.

My experience in Japan, for example, once involved a debrief meeting with our client when I was with an advisory firm in Australia. We had an inbound acquisition mandate with a Japanese multinational. 

Luckily, our sister firm from Japan was part of the team advising the client, which helped a lot with translations and guiding our advisory approach.

In this debrief meeting after meeting with the Australian counterparty, I did not think it through or anticipate anything that goes to my point from the very beginning. 

Now that I have had these experiences, I anticipate much more, and think much ahead of what may be certain questions or certain statements that can trigger a reaction from the counterparty or even the client.

Anyway, I asked, "How did you find the meeting? Are you broadly aligned? What do you think are the biggest challenges or obstacles between the two parties' positions?" I approached this as an open conversation to get feedback from our client. There was no response, which created an awkward situation.

In hindsight, I realized our Japanese client and their representatives had no mandate to express their position as a company and weren't comfortable sharing their personal perspectives. 

First of all, because they weren't aligned as a group in the room or with their superiors back in Japan. Essentially, we realized there was no way of getting any spontaneous feedback in this situation. We left it to the follow-up and our partner firm in Japan to debrief once they had an opportunity to align internally.

And then China, for example, one aspect I would call out in China is, obviously everyone knows about the importance of relationships, the dining, and just spending time together.

Fortunately, I was never in a position to always have to participate in relationship-building activities. As part of a global corporate, we had a Chinese team and an Asia Pacific management team who were already trained and participated in that part of the relationship-building. 

We did plenty of dining and drinking. There is a lot of cheering, much more often than here. In the U.S., you probably just cheer across the table and say cheers. In China, people would stand up multiple times during dinner, walk around the table, and cheer with you repeatedly. 

They would also ensure their glass is always lower than yours if you're the more senior person, which I find super intriguing. In China and Southeast Asia, where many business families have Chinese heritage or have been exposed to Chinese deal-making, negotiation is never over. 

They're not afraid of doing something that in continental Europe or the Western world is not seen as legitimate, which is reopening previously agreed positions. In China, they don't see it as negative or unethical to revert to a previously agreed point and express a completely different position.

We’re currently doing a very interesting deal in a Southeast Asian country, and it's fascinating to see how some points we thought were agreed upon are later positioned as misunderstandings. They don't openly say they've changed their opinion. Instead, it's just positioned as a misunderstanding. 

Even if you had the clause on screen and reworked it together, you might receive feedback a week later that there's no longer agreement on that point. In these cultural contexts, this is not seen as negative; it's just a legitimate way of doing business. Until everything is agreed, nothing is agreed.

Cultural differences in European M&A

There are many differences in the nuances. This is outside of M&A, but my wife and I once lived in Australia for two years. Being so far away from Europe gives you a different perspective on things. 

We had expat friends from all over the world, including different places in Europe, and suddenly, you notice how similar you are to fellow Europeans. Whether you're from Belgium, Switzerland, or France, you feel very similar. But of course, there are nuances and differences.

For example, I did a few deals in France. What I find challenging sometimes is that they insist on French being the language, at least in small and mid-cap transactions. Same experience in Germany. This might be because we are Switzerland-based, where German and French are our official languages. 

People expect you to speak some French or German. Our French management teams, despite being perfectly fluent in English, insisted on having a French law firm, French SPA, French NDA, and everything in French.

In Switzerland, due to our small size, we're used to adapting to others. France and Germany are more used to insisting on their preference. In Germany, people are still much more comfortable speaking, negotiating, and dealing in German.

This is a big difference, especially when considering that in our global executive team, no one speaks German fluently except one person. This creates complexities day-to-day. 

For example, when you need to summarize, you need an internal lawyer who speaks German. Our corporate M&A lawyer doesn’t speak German, so we need to find someone in our legal team who does. This deviates from our central M&A lawyer resource approach.

Handling internal cultural differences

What comes to mind spontaneously is that as an M&A team, we are naturally intermediaries between different cultures internally. The finance team has a different culture and awareness of risks and opportunities due to their role. Legal, compliance, IT, commercial teams, and executive teams all have different approaches. 

These teams and regional teams need to be brought together and held together. The glue is often the M&A team, which coordinates between different roles and opinions. That's one of the main challenges for an M&A team: staying close enough to everyone so they share their concerns openly and see you as a sparring partner while also being impartial. 

You need to triage which points to incorporate into your positions and which to ignore, adapt, or adjust. These different cultures exist across companies, within the company across regions, and in functional teams.

In our role, we guide our team to be close to everyone in the organization. Apart from the executive team, the M&A team probably knows the most people because other teams tend to stay within their regions or functions. We need to know the entire organization, be friendly with everyone, and have access to people.

Negotiating cross-border M&A deals

The main determining factors for the speed of a deal are the competitive environment and the nature of the M&A market. Currently, we're in a market where everything takes a long time, often due to the lack of competitiveness in processes. 

We're often engaging in bilateral processes, or if it's a competitive process, it quickly feels less competitive than the sales side would have wanted.

Regarding cultural differences and their effect on the speed of execution, I haven't experienced this as a major driver. In certain regions, you spend more time on origination. In the U.S., it's typically one or two calls to know if someone is open to sell. 

Once it comes to execution, many deals across regions have taken a long time, especially since the market shifted one or two years ago.

Overcoming cultural misunderstandings

Start by being aware that misunderstandings could occur and the differences in communicating potential misunderstandings. Maybe in our cultural context, it might be normal to clarify misunderstandings during the meeting by saying, "Sorry, I didn't fully understand. Can you clarify this point?" 

In other cultural contexts, especially in Asia, losing face is a stronger concept. It’s typically more difficult, and you may wrongly assume the meeting went well because nobody objected to your positions. 

For example, in Southeast Asia, as a Westerner, you might walk out of a meeting with no open controversial discussions and misunderstand this as silent acceptance. You only find out later that wasn't the case.

Once you realize this happens, you try to anticipate it. We sometimes use local lawyers in addition to international law firms. Particularly with non-private equity sellers, like a family, we offer for them to talk in their local language. 

Our lawyer might walk them through an SPA or the main changes, and I've instructed our external lawyer to be slightly more impartial to gain their trust and explain things without taking a negotiation position.

In-person meetings are more important. We ensure a lengthy process with check-ins, triangulating positions, and comparing notes to make sure we're getting the same signals back. If there are differences, we resolve them, knowing that misunderstandings might not be proactively stated. We also try to work collaboratively, but this can be more difficult.

Building global relationships for pipeline

From a central organization perspective, there is no way we can be as close to our targets as some of our private equity-owned U.S. competitors. In the U.S., mid-sized competitors have been very acquisitive, and some acquisitions happen without an auction process, based on years of relationship-building and trust. 

When the owner is ready to sell, they know where to go. They didn't come to us because of the strength of those relationships. Relationships are super important.

As a global corporate, we follow a tiered approach. When I joined two and a half years ago, I wanted to understand the key targets, our history with them, and if we had established dialogue. We identified key targets, made prioritizations, and then I started traveling. 

You can't be in Latin America and Asia at the same time, but I traveled around the world, visiting India, Latin America, and the U.S., combining meetings with conferences, and meeting local management to stay close.

We also involve other people in the organization. When our CEO travels to Latin America to meet customers, we arrange meetings with interesting target companies. The same goes for our CFO and, in specific cases, our chairman, who is very supportive of M&A and interested in pushing a strong M&A agenda. He’s also involved in justified cases.

We rely on local teams, regional management teams, and country management teams to stay close to these targets. Relationships with local heroes are often built through our local teams. They know who they are losing business to and who is hiring our staff.

Our approach is based on prioritization and includes other people in our organization. We also use video calls to stay in touch. However, we have learned that you cannot replace an in-person meeting with video calls. 

I may be at a risk of sounding too traditional or conservative. A handshake and being in the same room cannot be replaced by a screen. Video calls are a tool to follow up and stay close between in-person visits.

For example, we are now talking to a very successful family-owned business in Latin America. I started talking to the family two months after I joined two and a half years ago. They initially said they were not for sale. 

We maintained an open relationship, talking about various topics except a potential transaction. Two years later, they started opening up, and this is where we are today.

The main challenge is the wide range of norms and contexts you face when traveling to all these countries. I often have the privilege of having people in our global organization that I can talk to, to understand the social and business context. 

In many cases, I get a warm introduction. For example, a regional MD has met the person, then introduces me to our global head of M&A. This briefing helps tremendously. You can do research and speak to people in your network who have been to these countries. 

One of the tips and tricks I also have is I was part of a global organization, Kuehne + Nagel, present in almost all countries where you'd want to do business with as a Western corporate. I can easily call people for input. 

That’s what I do, get internal references. For example, when I went to India, a very foreign place for me, I met several people introduced by others in our organization and talked to several people from India within our organization to get insights.

I take the same approach of getting to know people personally as well. Sports help as well. Swiss people are not typically as good at small talk as Americans. Living in Australia taught me how easy it is to get to know people with no initial barrier to starting a conversation. I've tried to adopt this, identifying common interests, whether sports or other topics.

My father was a role model in this regard. He could establish a connection with almost everyone. I try to adopt this, but it's difficult, and I don't always succeed.

Other tips for building cross-cultural relationships

The technical stuff is universal. Lawyers can talk for hours about differences in SPAs across regions and countries, like how warranties are more accepted in the U.S. versus Asia. But in the bigger scheme of things, the technicalities are quite universal. 

The main part I'd highlight is awareness of different cultures, contexts, situations, life goals, and ways of doing business. Many times, I've been surprised by how different people view compliance. 

In some parts of the world, compliance with laws and regulations is seen more as a guideline, not something to stick to 100%. In the U.S., there's no wiggle room when it comes to bribery and corruption, whereas in some countries, there is. 

In these situations, if you like to talk, socialize, and connect with people, you need to be careful not to say things that offend or surprise them. Avoid judging others and think twice before making statements, especially if something is different from what you expect. There may be a good reason behind it, or it might be totally acceptable in that environment.

If you're someone who doesn't want to step into the room shouting and demanding attention, it's better to enter quietly, observe, learn, listen to people, and then, at the right moment, make your statement and define your position. People will listen to you more attentively. 

If you can adapt this approach and recognize which approach suits the situation, it will help you navigate those surprising situations.

How to manage coordination between global work streams

Our approach to coordinating M&A is likely very similar to what many of your listeners do. It's a normal project management approach where we have a project management office, which in many cases consists of two people—one of my team members and someone ideally in a senior enough position locally in a regional or country management team. 

This person knows the business well, knows the main stakeholders locally, and knows how to get things done and meet timelines. This is crucial for a global corporate coordinating different deals in different time zones.

You can't be everywhere. By the time we get to the office in the morning, it's almost evening in Australia. By the time U.S. colleagues, especially on the West Coast, come online, our day is almost finished. So your day never really finishes. There are only a few hours where you can't be working. 

Naturally, you can't work 24/7, so you need someone on the ground locally who can help you get things done. This person might not be M&A trained but could be a business development manager, a corp dev, or someone with a COO or national finance role.

The project management office then coordinates all the work streams, which include legal, finance, tax, operations, commercial, IT, HR, etc. These workstream leaders consist of global and regional roles. We use many templates and checklists. 

One of our roles is to leverage learnings from other deals and bring them into the current deal. The day-to-day activities are coordinated by the project management office, which typically has two or three calls with all the work streams per week. 

They also have one-on-ones with the most important work streams, especially when they're behind schedule or there are important findings. We always have external support, typically for legal, finance, and tax.

For externals, we use local teams but always coordinate through central teams at our advisory firms. For example, if we do due diligence in Vietnam with one of the big four firms, we make sure to involve people we know centrally for quality assurance. This helps with coordination and efficiency in decision-making.

The project management office then reports to the steering committee, which consists of the regional CEO, regional CFO, group general counsel, and myself. 

The steering committee reports to the company's investment committee and ultimately to the shareholders. Our very active shareholders support a selective but active M&A agenda. They also help and guide us a lot.

This is how we coordinate the different work streams. It's a key part of our job, probably the most underestimated part, because executives typically see only the end product and not the amount of work that goes into producing a certain deliverable. They don't know how many times you had to chase someone or how much support and guidance you had to give.

Keeping M&A teams aligned on priorities

It's even more of a challenge in my current company because there is so much going on in the market. M&A projects always compete for management attention and resources with other projects and organic growth opportunities. You need a focused approach on what's really important.

Many teams won't naturally be focused enough. Functional teams like legal, tax, and finance often see all their findings as super important. Back to my point, as an M&A team, you need to be able to do a triage, saying, "Look, in your work stream, I appreciate you could look into 30 topics. I want you to look into five topics." 

You take responsibility for the other 25 topics not being looked into, which requires alignment and judgment. We provide this steering through the calls I mentioned, the steering committee, and checklists. 

Checklists sound simple, but they are tools to leverage insights from other deals. We create checklists for people to focus on what we need to understand. You can always have one or two additional items, but the core is to get people to focus.

This is never a one-off effort. It's an iterative process. With shareholders or executive teams, generating one learning leads to the next follow-up and may reveal a finding we hadn't focused on sufficiently. Then we put focus on that topic. It's an ongoing, iterative process.

Crafting irresistible offers in M&A deals

Interestingly, in 2018 in the U.S, Kuehne + Nagel acquired a company called Quake International Courier. It was private equity-owned by the Jordan Company, a well-respected private equity firm. We were introduced through a small advisory firm and started talking.

I don't have an exact understanding of their considerations, but they sold approximately two years into their ownership of the company. 

We offered them a deal with a structure that provided enough return on their investment and additional upside based on an earn-out structure. This incentivized them to engage in the transaction with us on a bilateral basis, but also aligned us to be protected enough and aligned the incentives with both the seller and the management team.

That situation is probably the closest we've come to convincing someone to sell. We didn't need to convince the private equity firm to sell, but we definitely made them an offer that incentivized them to sell earlier than planned.

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