Martin Deschênes
Partner | CPA, CA | Financial advisory

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…

But price 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.

14 Jun 2017  |  Written by :

Mr. Deschênes is a partner at RCGT. He is your expert in Transaction Support for the Montréal...

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