International deals are one of the most challenging deals to pull off. There are a lot of barriers and cultural differences that could potentially derail your value creation. Martin Richenhagen, the former CEO of AGCO Corporation, has vast expertise in the matter, and he shares why international deals fail and how to make them successful.
"You need to be a good communicator, good listener, and you need to understand your business very well. And you need to understand the target business even better." - Martin Richenhagen.
Martin's primary role in M&A is talking to their target companies' owners and families, and cultivating relationships with people takes up 30% of his time. Frequently, target companies are not willing to sell yet, and having a good relationship with them will get you considered when they are ready for a merger.
When it comes to international companies, communication gets even harder. Approaches can vary depending on the culture of the country. Some countries are more straightforward and open to acquisitions, while other countries are more conservative than they perceive acquisitions as takeovers. In those instances, you will need to build a relationship first and wait until the idea of a merger floats organically.
Martin has also never shied away from befriending competitors. His advice is to be interesting and make it seem like you are willing to divulge information. This will get competitors to start opening up and forming that bond of friendship. Just be careful that you don't disclose sensitive information.
Making international deals successful takes a lot of work. You need to master the country's language to understand the details of the transaction entirely, which includes being an active listener. You don't want to come across as arrogant or forceful to the incoming team.
Objectively assess the processes of both businesses. The target might have a better process than you, and dismissing it will cost you value. For as much as possible, keep the management team in place, even for a short period of time. Spend enough time to understand how good they are and how valuable they can be in your organization.
Lastly, understand the strength of the brand that you're buying. Sometimes, the brand of the company you're buying is stronger than your current brand. Remember, just because you are the new owner doesn't mean you have to change everything in your direction. He has a perfect story of this kind of deal involving Klockner-Humboldt-Deutz purchasing Allis Chalmers. If you want to hear this story, be sure to listen to the full podcast episode.