How to Handle Global M&A

27:04Being so far away from Europe gives you a different perspective on things. And we had friends, expats, fellow expats from all over the world, but also different places in Europe. And all of the sudden, you notice how similar you are as fellow Europeans. And whether you're then from Belgium or Switzerland or maybe France, we still have those friends now, even many years after us living there. And it feels like you're very, very similar. But of course, there are nuances and differences. One thing that, for example, I did a few deals in France. What I find challenging sometimes in France is that they, obviously that's again, you know, generalizing things, but typically they insist on French being, at least in small and mid-cap transactions, they insist on French being the language.

27:55The same actually is my experience in Germany as well. This is probably because we are Swiss-based, Switzerland-based, and obviously German and French are our official languages. So I guess people do expect you to speak some French or obviously German. We do speak SPAs in French, for example, in France. Even our local management teams, when we did this, this is my back in my time with Kühne Nagel, our French management teams, despite the fact that they were perfectly fluent in English, they insisted on having a French law firm, local law firm, French SPA, French NDA, everything in French. I think in Switzerland, because of the small size of our country, we're used to adapting to others.

28:42Whereas I think France and Germany are more used to maybe also insisting on their preference. In Germany, for example, we did a few transactions over the years in Germany. People are still much more comfortable speaking and negotiating and dealing in German. It's a big difference, for example, when you consider that in our global executive team here, no one speaks German or at least not native or fluent. And so then, of course, this creates just day to day, creates some complexities, but it's deviating our approach from using the central sort of M &A lawyer resource. We need to deviate from that approach and use someone else.

29:20Build a whole expansive matrix on all these cultural differences. One question actually that sticks out is when you think about culture and differences, I think there's like a view of layers. you know there's sort of like these broad things of what defines a culture at a high level but even when i'm familiar with doing a lot of domestic deals in the u.s you start breaking down culture to the individual organization level in terms of their leadership style how they make decisions and things like that and then you can even click deeper because within the company the different departments could have different cultures do you sort of separate the two or is there anything like that you better wrap your head around when you're approaching a deal?

29:58As an M &A team, we are naturally going to be the intermediary between the different cultures internally. Finance team has a different culture, different awareness of risks and opportunities due to their role as well. Legal, of course, naturally as well. Compliance. IT is different again. And obviously all these work streams and then maybe also on the more risk-seeking side, commercial teams, executive teams, all of these teams and people and approaches and also regional teams need to be somehow brought together and held together and the glue is very often the M &A team who then needs to be almost the coordinator between the different roles and different opinions and I think that's that's one of the main challenges also of an M &A team to stay close to everyone close enough so that they come to you also and share their concerns openly so that you're seen as impartial but yeah in the end, you need to make a triage as well.

30:55Which points do I now take on board and incorporate in our positions and which ones do I recommend to ignore maybe or to adapt or adjust? These different cultures obviously do exist across companies and within the company across regions and across functional teams as well. And you're just trying to factor it in as much as you can to put a whole picture together. Apart from the executive team, we're probably the team, naturally the M &A team is probably the team that knows the most people in our organization. Usually other teams, other functional teams or other regional teams, they're staying mostly within the region.

31:30Functional teams are staying mostly within their functions. Obviously that is not a true statement 100%, but it tends to be the case. Whereas we need to almost know the entire organization and also kind of be friendly with everyone and have access to people. Teach me about the negotiations specifically. How do you differentiate your approach when it comes to negotiations? And I'm also curious about the speed because I feel like generally in the U.S. we like to get deals done pretty fast. And some countries take way longer. And I'm just kind of curious, like how does that, do they come hand in hand, your negotiation approach?

32:07We mentioned some countries have a bigger emphasis on building trust. Does that sort of impact the speed of the deal? I think the main determining factor, and I will be interested in hearing some of your listeners and their opinion, but my experience that the main determining factor for the speed of a deal is the competitive environment and the nature of the M &A market. where there is cultural differences and how they affect the speed of execution. Honestly, I haven't experienced this as a major driver. For sure, in certain regions, you spend more time, as I said before, origination in the US is much quicker, typically one or two calls and you know if someone is open to sell or not.

32:50That's for sure different. Also recently, since the market has shifted, maybe one or two years ago, have been involved in so many deals across the regions and almost all of them have taken a long time. Well, it's a big thing to adapt for as you sort of, more gaps you have culturally, it's probably more time to get those understanding overcome. What about like cultural misunderstandings or miscommunications? How do you overcome it? You start by being aware that these misunderstandings could occur or also the differences in communicating potential misunderstandings. Maybe in our cultural context, it would be more normal behavior to just say that straight during the meeting even.

33:35Hold on, sorry, I didn't fully understand. Can you clarify this point? Whereas in other cultural contexts, especially in Asia, I've made the experience. Of course, Asia is not just Asia, but again, in countries where maybe losing face is a stronger concept, it's typically more difficult. You may be in the wrong assumption that the meeting went very well just because nobody objected to your positions. So this is, for example, in Southeast Asia has been my experience. As a Westerner, you walk out of the meeting, you've had no open controversial discussions and you misunderstand this as a silent acceptance of your position.

34:15And you then find out only a couple of days later. And so I think once you've realized this, you know, to your question, how do you deal with it? Once you've realized this happens, then you just try to anticipate it. So what we do sometimes is we then have local lawyers. So we typically use international law firms, but we then have a team consisting of local lawyers as well. We then very quickly, in particular when it's a non-private equity seller, let's say a family, we offer that they talk in local language, for example. that our lawyer walks them through an SPA or walks them through the main changes.

34:53I've instructed our external lawyer to be specifically slightly more impartial than maybe what he or she would be normally, just to gain this trust and this perception that he or she can explain things to them without taking a negotiation position. In-person meetings are more important. It's quite a lengthy process. So we try to check in with them once in a while. We try to triangulate positions as well. So if I have a counterparty that I speak to, then we make sure that we have maybe a different team member from our team, maybe a local team member, then also talking to someone else on the counterparty on the other side.

35:34And then we compare notes and we make sure that we're getting the same signals back. And then if there is differences, we try to then resolve them because we're conscious that there could be misunderstandings and that they wouldn't be proactively saying those. Those are some of the mechanics. Obviously, we then try to put it on screen. We try to work on it together collaboratively. But that is typically, as I said before, more difficult. You're teaching me how to be Swiss. That's what they say. Somebody's got to be Switzerland on the deal. Sometimes it does. I think it does help a tiny bit. The same way we are now talking very general terms.

36:12Obviously, everyone has a certain perception of people. And I think the Swiss do have this justified or unjustified, but we have this aura of maybe being a bit more neutral or reliable in our position. So sometimes it does help. That makes total sense in terms of overcoming the miscommunications or misunderstandings. The business development part still gets me because you're building a pipeline and you're running across multiple countries. How do you manage that? Like, how do you manage the relationships with all these people across the world? What I want to dig into is I feel like in the US, you visit people.

36:52Like at the end of the day, you want to spend FaceTime to build a relationship, to build trust, to get that conversation of like, hey, can we do a deal here or not? You just suck it up and do it? Or is there, maybe we have some more phone calls in between. Just teach me how to do it. There is no way we can be centrally speaking or, you know, as a, you know, from a central organization perspective, we can be as close to our targets as maybe some of our private equity owned US competitors are. In the US, we have mid-sized competitors of ours that have been very acquisitive. So relationships are super important.

37:28As a global corporate, we can never be as close as some of our competitors can be. What we can do is obviously we do follow, let's say, a tiered approach where what I did two and a half years ago when I joined, first thing was I wanted to understand obviously who are the key targets out there. What is also the history with some of these targets? Do we have an established dialogue with some of them? Have we even tried to purchase some of these businesses? Have we done due diligence on? Who have we done due diligence on, etc.? So that's what I tried to understand immediately when I arrived. Then we identified the key targets.

38:06We made a prioritization and then I started traveling indeed. And yes, you can't be in Latin America the same time you are in Asia, but I did travel pretty much around the world. I did go to India. I did go to different countries in Latin America. I did go to the US. You try to combine it with different meetings, maybe attending a conference, definitely meeting your local management because you want to stay close to them as well. You try to make it worthwhile. You also try to then include other people in your organization. So whenever our CEO is traveling to Latin America to meet customers, we try to arrange maybe some meetings with interesting target companies, the same in other regions.

38:48Same goes for a CFO. And then, of course, we rely on our local teams, regional management teams, country management teams to stay very close to these targets as well. So this is now going down the list or the level of priority. In many cases, relationships to local heroes are built through our local teams or they're even identified by local teams. They know who are they losing business, who is hiring some of our staff or where is our best staff coming from, which is also quite telling in terms of the commercial and the operational capabilities of these companies. So we do an approach that is based on prioritization, includes other people in our organization.

39:29Nowadays, video calls are used as well to stay in touch. But I would say maybe as a last point on this question, we have done the mistake in the past of thinking that you can replace an in-person meeting with video calls. It's impossible. I maintain or even at the risk of sounding too traditional or conservative. I'm sure many people will agree a handshake. What we have here in this room being in the same room cannot be replaced by a screen. We're learning that. So of course, we use it as then a tool to follow up and stay close in between the in-person visits. But for example, we are now talking to a very successful business in Latin America.

40:13They're in the market now. We very much like the business. It's family owned. And I started talking to the family two months after I joined, two and a half years ago. And then at that point in time, of course, the family said, look, we're not for sale. And we just maintained an open relationship. Two years later or one and a half years later, they started opening up. And this is where we are today. It's nice to get a local team when you have it. But for the rest of it, there's no real shortcuts. You got to hop on the plane. Give me the playbook on building that relationship. Because in America, I know you just take people to a bar, have some drinks, and then things just kind of flow pretty naturally from there.

40:54You get to know each other about their family, their philosophy, share war stories. And I think that's sort of what I grew up around is the approach to building that rapport and trust to set things into motion, to do a deal. What's your experience? Because I can imagine it's got to be broader where you're going to countries where people don't even drink. and then you got the other extreme where they drink way more than most other countries. It's true. The main challenge is exactly that. The main challenge is the wide range of norms and the wide range of contexts and environments that you're going to be naturally facing when you travel to all these countries.

41:32I must say I have the privilege of often having people in our global organization that I can talk to to understand the social and the business context. that some of these people that I meet are in. Or in many cases, I have a warm introduction. You can imagine a regional MD has met this person already. They have spoken about it. Then the next step was, okay, let me introduce you to our global head of M &A. Then I travel there. Obviously, then I have the briefing from that person and that helps tremendously. Of course, you can do research. You can speak to people in your network that have been in these countries.

42:11My one source of, let's say, intelligence or just tips and tricks that I also have is I was part of this global organization, you know, in Künanagel that was present in almost all the countries you would want to do business in as a Western corporate. And I can easily call people and ask them for input. That's what I do. Get references, internal people that I speak to. For example, when I went to India, which is very foreign to me. I've never been, even as a tourist, I've never been to India. Then I went to India. First of all, I met several people that were introduced to me by other people in our organization.

42:50And secondly, we have several people from India that work in different parts of our organization that obviously it was super easy to talk to and get some insights. But do you still take the same approach of getting to know people personally? Yes. Is that sort of fundamentally universal? It feels like, yeah. You got kids, married, all that stuff, where'd you grow up? Sports helps as well. I'm terrible at that part. You must be great. No, I got the short-tentious man. Like I can't sit there and watch any sport. At sports specifically, yeah. But I mean, what Swiss people, again, talking in very generic ways, is Swiss people are not typically as good as, for example, US Americans, is small talk.

43:30So what I've learned those two years when we lived in Australia, how easy it is to get to know people in Australia and the same experience I've had in the US, where this initial barrier of starting to talk with someone, whether it's in the airplane or whether it's in the train or wherever, at some kind of event or bar or restaurant, there is no barrier, almost no barrier. You can talk to everyone. And this is something that I learned over the years. And I tried to maybe identify, and sometimes it's easier and sometimes it's more difficult. I tried to identify some kind of common interest. And that's why I said often sports helps.

44:09And I'm quite interested in sports and whether it's, yeah, okay, I'm probably not that good at cricket, for example, but, you know, many other sports I'm interested in. So that helps. I try to be relatively broad in my scope of stuff that I'm interested in. That's like part of M &A training is, do they have like improv acting? Is that a thing over here in Switzerland? No, I've never been able to do any such training. I had a couple of years in doing this podcast. I started taking theater, stand-up comedy, storytelling, and not improv. I did Meisner. It's a different acting approach. But it teaches you that stuff of just looking at someone and just, that's a cool watch.

44:47is it a prerequisite to have a nice Swiss watch in Switzerland? For sure. It is. We talked a lot about differences across cultures and countries and regions, but I think what always works is just what you just did, showing interest, whatever it is, right? So I think that's quite universal. All right. Fair enough. It's doubling down on the fundamentals, especially when it comes to overcoming cross-culture. What other tips and tricks do you have for someone like me that's aspiring to go do big cross-border deals at some point in my career. You're coming from the perspective of, you've done M &A in your past.

45:22I know that M &A advisory, if I'm not mistaken, right? I've done everything, most of it's domestically. I've done some cross-border company based in India, acquiring a business in the US, but a little bit of the same thing, like here's your client and educating them. How the climate works in the US is very different than India. I want to kind of get ahead of the learning curve of what are some of these things as I push myself and challenge myself to do more of it of things that may be unique that you learned from your experience that, hey, be open-minded about certain things in approaching cross-cultural type of relationships and the transactions themselves.

45:59The technical stuff is pretty universal. Of course, lawyers will be able to talk for hours about differences in SPAs across regions and across how W &I insurances are more accepted in the US versus Asia or whatever it is. But in the bigger scheme of things, the technicalities are quite universal. The main part that I would highlight is probably just this awareness for different cultures, for different contexts, for different situations, maybe for different life goals, for different ways of being committed to your family, to your stakeholders, to different ways of doing business as well. I found so many times I was surprised about how, for example, different people look at the compliance.

46:49Compliance with laws and regulation in some parts of the world is again seen in a more relaxed manner. It's more seen as, okay, it's a guideline, but I don't need to stick to it 100 % for sure not, right? Whereas of course, in our context, the US when it comes to bribery and corruption, for example, knows no mercy or no wiggle room. Whereas in some countries, this does exist. You need to be careful that you don't say things that offend people or take them by surprise. So not judging other people and thinking twice before you make certain statements when you feel like, okay, this is maybe very different to what I would have expected.

47:29So let's be careful because maybe there is a good reason behind it, or maybe this is totally acceptable in this environment. It sounds like mirroring is like the key skill here. That makes a lot of sense. To some extent, I like this approach as well. It helps if you are a person who doesn't want to step into the room and start shouting and everyone needs to look at you and listen to you. You better enter the room, you go into a corner, you observe, you learn, You listen to people and then at the right moment, you then make your statement and you then define your position and then people will listen to you truly because then whatever you say will be more powerful.

48:07If you're a person that likes this approach, but can also break out of this pattern when it's needed or recognizes which approach is more tailored to which situation, that will help you navigating those situations where you will be inevitably will be surprised. I don't know if this necessarily is related to cross-border, if it's more just fundamental, but how do you manage the coordination between different work streams, like tax, finance, legal, and the operations in your M &A team? Our approach to coordinating M &A will be, to many of your listeners, will be very similar to what they do as well.

48:46It won't sound completely different. I think what we do is a normal project management approach where we have a project management office, which in many cases is two people, one of my team members, and then someone ideally locally in a regional management team or in a country management team in a senior enough position, experience enough so that he or she knows the business well enough, knows the main stakeholders locally, knows how to get people to deliver on timelines. That's one of the challenges for a global corporate. You're coordinating different deals at the same time in different time zones.

49:29By the time we get to the office in the morning, it's almost evening in Australia. By the time the US colleagues, especially on the West Coast, come online, our day has almost finished. So your day never really finishes. There is only a couple of hours where you truly can't be working 24-7, that you could be working. Naturally, you're not going to be able to do that. So you need someone on the ground locally that can assist you in getting stuff done. Now, in many cases, that's not an M &A trained person, but it's, for example, a business development manager or a corp dev type of person who has maybe a COO role in a region or something like that.

50:10or maybe someone who has even been in the corporate headquarters and is now in a national finance role, for example. So this is then the project management office who coordinates all the work streams. The work streams are the usual work streams, legal, finance, tax, operations, commercial, IT, HR, etc. These work stream leaders consist of global people, global roles and regional roles. One of our roles is really to leverage the learnings from other deals and to bring them into the current deal. So that's how we coordinate the day-to-day activities. The project management office then has typically two or three calls with all the work streams per week.

50:51In addition to that, they will have one-on-ones with the most important work streams for sure. For example, when they're behind schedule or when we know there will be important findings. Then we obviously always have external support, typically for legal, finance, and tax. So this then helps to coordinate. We then, for externals, we try to use local teams, but always coordinate the true central teams at our advisory firms that we know. So for example, when we do a due diligence in Vietnam, let's say one of the big four firms, which we don't know their office in Vietnam, we then make sure that we know the people centrally and that we have them involved as well, and they will do the quality assurance, which helps a lot with coordination because you're just much more efficient in terms of getting what you actually need ultimately for your decision making.

51:42The project management office then reports into the steering committee, which consists of the regional CEO, regional CFO, group general counsel and myself. The steering committee reports into the groups or the company's investment committee and ultimately into the shareholders. We have very active shareholders who are very supportive of M &A, want us to have a very active M &A agenda with a selective approach, but very active. And they also help us a lot and guide us as well. That's really how we coordinate the different work streams. it's obviously a key part of our job probably the most underestimated part of our job because key executives typically just see the end product and they don't see how much work goes into producing a certain deliverable they just see the final product they don't know how many times you had to chase person X and how much support you had to give and guidance you had to give to person Y that's a lot in terms of coordinating, managing, which is needed But in terms of any specific approaches to keep your team aligned on the highest priorities throughout a transaction, I think that's a challenge of its own where it fluctuates.

52:51Absolutely. There is so much going on in the market out there that obviously M &A projects always compete for management attention, resources with other projects, organic growth opportunities. You need to have a focused approach on what is really important. Now, coming back to one of my early points, being able to do this triage as an M &A team, saying, okay, look, in your work stream, I appreciate you could look into 30 topics. I want you to look into five topics. Then you need to take responsibility, of course, that the 25 other topics were not looked into. This requires certain alignment, of course, judgment, which alignment is necessary and which not.

53:32And ultimately, how we try to provide this steering is through the calls that I mentioned, through the steering committee. That's one of the tools how we try to leverage the insights from other deals. That we create checklists for people to say, look, typically this is what we would like to understand, this, this and this. And of course, you can always have one or two other items. But this is the other part of the core of what we do is really getting the people to focus. And there's never a one-off effort. It's an iterative process. Finding out one learning or leads maybe to the next follow-up and leads maybe to the realization, okay, there is a finding here that we may not have focused sufficiently on.

54:15Let's put focus on this topic. So it's an iterative process. Pushing your teams to prioritize, making them prioritize. Exactly. Do you have an example of misunderstanding that you had on a deal? Like a real cultural difference? We pursued this opportunity in France and I think we didn't succeed in establishing mutual trust. Essentially, the major misunderstanding was that we always talked openly and we had term sheets going back and forth. we had several meetings, including our CEO, CFO, myself, regional management teams meeting with a counterparty on different levels, including, you know, their CEO, the holding group CEO, the ultimate family or the ultimate private owner, private individual.

55:09And somehow in the end, we noticed, and maybe this is a cultural element, maybe it's a personal element of that person, but We noticed in the end that despite having had so many interactions, ultimately he was not willing to let go control over his company. But you know, this was not an obvious misunderstanding. We did say that we want to be able to fully consolidate. We want to be able to control the board, control the management team. But I think it was this cultural complexity that I think exists with private individuals, private owners, founder owners. At a certain point in time after X interactions, they realize what it would actually mean to do the transaction.

55:56That it means to let go of a lot of things, social status, control over your baby, the company built, control of what happens to your staff, your management team, etc. And then we reached a point where we said, you know what, actually what you're asking from us, We already told you months ago that we can't offer it to you. And you probably have a similar sensation that you're not getting from us what you believe you have told us before. So somehow we came to this point where we realized both that we were talking to each other, but maybe not listening or maybe not being clear on our messages or clear enough.

56:38And sometimes this happens when, you know, we talked about the mirroring a bit a few minutes ago. When you do that too much, it also creates this false impression that you are aligned. Whereas ultimately, we are a corporate. We want to make money. If needed, we will reduce headcount. If needed, we will generate synergies by letting go management team if it's a duplication with our management team. many of these family owners have a certain desire for continuity post-transaction. And you try to bond or you try to establish a relationship by not being too confrontational and showing understanding.

57:18If that goes too far, then you go too deep in your interactions on false premises, so to say, if that makes sense. Yeah, I think I like it. You only realize late, actually, we were talking about different things. That's a good example. Have you ever convinced somebody to sell their company? Interestingly, we have 2018, if I'm not mistaken, in the US, it's public. In Kuhn-Nagel, we acquired a company called Quick International Career. It was private equity owned, owned by the Jordan Company. Very well respected private equity firm. We got introduced through an advisor, small advisory firm. We started talking and I obviously don't have an exact understanding of what their considerations were when they started talking to us.

58:08But for sure, what I know is they sold approximately two years or so into their ownership of the company. We were able to offer them a deal that had a structure which provided them enough upside, enough return on their investment, but also additional upside based on an earn out structure. that incentivized them to engage in this transaction with us on a bilateral basis, but also allowed us to be protected enough and aligned enough in the incentives, not only with the seller, private equity firm, but also the management team. And so that was maybe the situation that comes the closest to having convinced someone to sell in the first place.

58:50I guess you don't need to convince a private equity firm to come to sell, but we definitely made them an offer that incentivized them to sell earlier than they had. I thought that was too good. I couldn't pass up. Yeah, exactly. I think other elements around it falls into things we've already covered. It's so much around building trust at the end of the day. There's some fundamental things there, but a lot of it's paying attention to the cultural nuances and being respectful. I think that's the right direction. What's the craziest thing you've seen in M &A? The most surprising thing in hindsight that we did or that I've been part of was that we acquired, Again, this was a couple of years ago during COVID.

59:29We did this large acquisition in China without having met the counterparty or the management team that would then form the management team under our ownership in person, not even once. It was all based on a relationship that we had built exclusively based on video conferences, having seen of the CEO not more than face to face. we didn't know what kind of person he is it's difficult because also he didn't speak any english he understood english was our impression but we never really knew because there was always someone translating we didn't know how tall is he what's his body language how energetic is he it felt weird not having an understanding of who that person is and nevertheless again this is public information too.

1:00:19This was the acquisition of Apex International by Kuhn and Nagel. Huge transaction, by far the largest in Kuhn and Nagel's history. Based on, let's say, trust as well. Obviously, also based on extensive legal documentation, but based on trust built purely on the basis of video calls. The story comes up. Everybody's got a COVID experience that tends to be one of the craziest. But I remember during the time, it was only pure software companies that are mostly working remote that we're doing eminé that we're open about saying it at the time but yeah and you know it goes further than just relationship it's also you know in our business or in logistics business the same it was important to do site visits and i remember in covid what came up was a service and i think the big four looked into that as well probably covid didn't last long enough i'm not sure if someone started this service, but it was essentially a certified way of obtaining video footage that was then certified by a credible party that it's actually true, you know, because how could you do site visits?

1:01:25How can you get reassurance that your equipment to handle the cargo is in good enough state that these warehouses actually exist? What the utilization is and how much cargo is in those warehouses? How clean is it, et cetera? So that's super important and And that was not possible. Opened up my eyes to a lot of interesting things about doing Global M &A. Thank you so much for the time. You've helped me become a better M &A scientist today. Thanks for your interest. Those of you still tuned in, fellow M &A scientists that listen through the whole podcast, I value, appreciate you. Feel free to reach out.

1:02:00I love getting feedback and topic ideas. Usually I'm easiest to reach on LinkedIn. I think there's emails in the outro or in the show notes. They might have it in there too. So we'll look forward to it. And until next time, here's to the deal.

1:02:24Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com. Or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter.

1:03:09Again, that's mascience.com. Here's to the deal.

1:03:23views and opinions expressed on mna science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual this podcast is purely educated