Your SME has experienced considerable growth in recent years. It’s ready to expand by making an acquisition beyond Quebec’s borders.

Your analyses indicate that this is the most beneficial and least risky option. Provided, of course, that the price is right. However, this is not the only consideration. During the analysis, ask yourself whether the target business:

  • Has a solid management team.
  • Sells high potential products or services.
  • Operates in a market with strong growth opportunities.
  • Would provide synergies that will add value to your business and be beneficial for all stakeholders.

Note that it’s usually more advantageous to acquire a business that is less profitable than yours since there will be a higher potential to grow its earnings based on the transaction cost.

Team work

Here are a few considerations for a successful transaction:

  • Make sure you have a competent team you can rely on, with experience in cross-border acquisitions and the market where you want to set up. You will likely have to call on the support of financial, tax, legal, environmental and other specialists.
  • Involve various managers (production, human resources, etc.) in the acquisition project right from the start and in preparing the integration plan.
  • Prepare the integration very carefully and apply it diligently. Integration should not take more than two years, otherwise, you won’t reap the benefits of the expected synergies.
  • However, be flexible in the integration plan. Adapt it to the circumstances and review certain actions as necessary.
  • Send head office staff to the new location to oversee the integration process. They will also ensure that the new employees adopt your corporate culture and rules.
  • Don’t underestimate the cost of integrating the other company: it is often more than you’d expect.

The human side, a key component

The human component is particularly important when acquiring a business outside Quebec. Your ability to have the new employees engage fully into your company’s growth is essential to your project’s success. You need to:

  • Be aware of cultural factors (language, values, customs, etc.) that may be quite different from those in Quebec.
  • Give the acquiree’s managers a lot of autonomy. They know how it works, its business environment, local laws and regulations, etc.
  • Let them know their contribution is key to your success. Give them the opportunity to rise up the ladder within the group, by giving them international responsibilities, for example.
  • Invite some managers to your head office so that they can get a better understanding of your culture, work methods, etc.
  • Keep an open mind and take the time to analyze their way of doing things. Who knows? You might find that some of their practices are better than yours and should be adopted across the board.

There are several factors at play for a successful international expansion. Don’t hesitate to contact us. We are available to help with planning and carrying out your project.

Next article

The Grant Thornton International IFRS team has published Get ready for IFRS 17: A fundamental change to the reporting for insurance contracts. IFRS 17 Insurance contracts extensively rewrites the rulebook for insurance reporting. IFRS 17 is effective for annual accounting periods starting on or after January 1, 2021. It supersedes IFRS 4 Insurance contracts as revised in 2016 and marks the conclusion of the IASB’s twenty-year long insurance project.

IFRS 4 was designed to be an interim standard and therefore allowed entities issuing insurance contracts to carry on accounting for them using policies that had been developed under their previous local accounting standards. This meant that companies continued to use a multitude of different approaches for accounting for insurance contracts, making it difficult to compare and contrasts the financial performance of otherwise similar companies. IFRS 17 solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner.

This publication is designed to get you ready for the standard. It explains the key features of the standard and provides insights into their application and impact.

Next article

For several years now, the Internal Revenue Service (IRS) has been engaged in a vigorous campaign against international tax fraud and failure to declare bank accounts outside the U.S., including Canada.

As a U.S. citizen or tax resident (including green card holders) residing in Canada, what are your U.S. tax obligations and what solutions are available to you? To answer your questions, we have called upon the contribution of tax experts from the Raymond Chabot Grant Thornton network.

Q: What are the income tax compliance requirements for U.S. citizens living in Canada?

A: U.S. citizens and resident aliens residing outside the United States are required to annually file a U.S. income tax return and declare worldwide income to the IRS, insofar as this income is equal to or greater than the personal exclusion amount and the applicable basic deduction.

Q: In addition to filing a tax return, are there any other requirements to meet?

A: In addition to filing an income tax return annually, U.S. citizens and resident aliens are required to file form FinCEN 114 (Report of Foreign Bank Accounts) to disclose their interest in certain financial accounts held outside the U.S., if such interest exceeds US $10,000 at any given time during the year.

Furthermore, U.S. citizens and tax residents must also report certain information to the URS on their registered education saving plans, tax-free savings account, foreign trusts, and may need to file form if they hold an interest in a foreign corporation.

Q: What are the applicable penalties if these requirements are not met?

A: U.S. citizens and tax residents who have not or have only partially met their tax obligations become exposed to significant penalties and the risk of legal proceedings. For example, if you omit to file a U.S. income tax return, the IRS can tax you up to 25% of the amount due.

Additionally, if you omit to file the FinCEN 114 report without a valid reason, you may be subject to a civil penalty up to $10,000 per unintentional violation. For intentional violations, penalties may amount to the higher of $100,000 and 50% of the value of the foreign account.

Q: What can I do to adjust my situation?

A: To encourage taxpayers to take action and adjust their tax file, the IRS introduced a voluntary disclosure program in September 2012. This program, named Streamlined Foreign Offshore Procedures for Taxpayers Outside the U.S., applies to U.S. taxpayers residing outside the U.S. who have omitted to file income tax returns or information forms, as well to those who omitted to declare certain income.

The disclosure consists in performing all of the following:

  • Filing income tax returns (including all information forms) for the last three years;
  • Filing the FinCEN 114 bank account reports for the last six years;
  • Paying taxes due plus interest (all penalties are withdrawn under this program).

We can help lighten your burden!

The rules surrounding tax obligations for U.S. citizens and resident aliens are numerous and complex. If you are a U.S. citizen or resident alien and have not met your tax reporting or other obligations with the U.S. tax authorities, consult a Raymond Chabot Grant Thornton specialist who will help you find the best solution for your situation.

Do you have questions relating to U.S. tax issues? The tax experts of Raymond Chabot Grant Thornton can help you!

Next article

There is not a day goes by that you don’t hear about additive manufacturing, or 3D printing as it is more commonly known.

While the technology may have been around for more than 20 years and some patents have already expired, its rapid adoption in a number of fields such as aeronautics and medicine has created unprecedented interest, particularly with investors. But it’s not easy for local manufacturing SMEs to see how they can benefit from this technology nor how it could change their business model. Where should they start?

I find this field fascinating and I met with Martin Lavoie, Executive Director of Canada Makes, a national organization dedicated to promoting the adoption and development of advanced and additive manufacturing, to demystify the topic.

Myths and realities about additive manufacturing (3D printing)

Myth no. 1: Everybody will have a 3D printer at home.

Not really. It’s a bit unrealistic to think that 3D printing will be as common in our homes as a microwave oven or personal computer. This idea brought some companies, such as Stratasys to extraordinary heights only to have them drop back to earth. However, the industrial market, in particular for rapid prototyping and tool manufacturing, quickly adopted the 3D printer and service centre business model.

Myth no. 2: 3D printers can only be used for plastic toys.

If that’s what you think, you haven’t Googled 3D printing in a long time! 3D printers can print a wide array of materials, from thermoplastics and composite materials to the most exotic metals, such as titanium. A Montreal entrepreneur has even developed a printer that can print nanomaterials. It’s expected that machines capable of printing conductive materials will soon be marketed, which will revolutionize the electronic products market.

Myth no. 3: Only large businesses can afford these expensive printers.

This market diversified extensively and quickly. While some industrial metal printers may cost over $500,000, industrial plastic printers sell for under $100,000. There is something to suit all tastes and budgets. For example, at the RAPID conference in the U.S. this month, one business introduced a metal printer costing $120,000.

Myth no. 4: In the future, everything will be printed.

Obviously not! It will always be more cost effective to machine many goods, parts and industrial components. It is true though that some complex parts could not be machined and will have to be produced on a 3D printer in the future. It’s important to understand the advantages and disadvantages of 3D printing on the basis of what you manufacture. Get advice from an expert who can help you develop a 3D printing business plan.

Myth no. 5: The technology is too recent, it’s not worth investing in it yet.

Reality could catch up with you sooner than you think. Consider companies such as General Electric, Siemens, Ford, United Technologies Corporation to name but a few that are using 3D printing technology for their parts and components. If you are in these companies’ supply chain, no matter how distantly, or in the same industry, you would be wise to look into this now. You could hire a coop student who has a bit of additive manufacturing experience to prepare a feasibility study. Now is the time when you should determine where adopting this technology could make sense for you. If the feasibility study seems positive, take the plunge, work with a service centre. After all, you’re an entrepreneur and a good entrepreneur never passes up a growth opportunity.

 

If you haven’t seen remarkable examples in aeronautics, I invite you to view some GE videos, which can be found here:

http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/14434/GEs-Greg-Morris-Discusses-the-Formation-of-GE-Additive.aspx

Another example is the Norsk (Rapid Plasma Deposition) part for the Boeing 787 (which is finished by Mecachrome in Mirabel!):

https://www.aero-mag.com/norsk-titanium-aerospace-grade-additive-manufactured-structural-components-boeing-787-dreamliner/