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February 7, 2024

Navigating cross border M&A is one of the most challenging tasks for deal makers. There are a lot of intricacies involved that are unique to each country, and must be handled delicately. In this article, Jake Lin, Head of Corporate Development at Xendit, shares his best practices when executing cross border M&A, particularly in South East Asia. 

“When doing cross border M&A, you almost always need someone local to be that middle person to help translate and just make sure nothing gets lost.” – Jake Lin

Biggest challenge in cross border M&A

According to Jake, unlike the West where much of the dealmaking is very institutionalized and counterparties are generally pretty savvy, Southeast Asia is still a bit rough around the edges. Terminologies like earn-outs or reps and warranties are generally more uncommon.

Practitioners will spend more time breaking things down to layman terms and helping them understand why things need to be put into writing. From his experience, cross border M&A is a combination of education and negotiating, ensuring that they understand what you're trying to ask for.

Language barrier during cross border M&A

Another challenge is the language barrier that exists between countries. It’s either they don’t speak english, or speak but with broken grammar or a heavy accent. In such cases, it’s best to get someone local to help navigate, translate, and ensure nothing gets lost in the deal. 

It takes extra work and scrutiny to ensure that what is conveyed is translated appropriately in writing. In cases of ambiguity, it’s crucial to double or triple check what was agreed upon and record it in writing to ensure both parties understand the agreed concepts.

Managing cultural differences during negotiations

Aside from these challenges, cultural differences play a significant role in cross border M&A during negotiations. One of the starkest contrasts is the importance of honorifics in Asia. In many Asian countries, it's customary to use honorifics like 'Mr.' or 'Miss' before someone's name, especially if they're older.

Also, individuals from the States might be more direct and assertive, which is not always well-received in Asia. It's important to navigate conversations with a certain level of politeness, even if it feels somewhat superficial. 

Cross border M&A best practices

To navigate cross border M&A successfully, it is crucial to build trust early on. Meeting them in person and showing them who you are creates affinity and helps a lot. Communicating your style upfront is also beneficial, and could help avoid conflict down the road. It generally makes people more open and accepting. Another best practice is to slow down and enunciate words more clearly.

Advice for first-timers

For first timers, Jake advises to observe and respect the local nuances. Try to really interpret and understand how the other party acts and functions. Lastly, the first meeting usually doesn't lead to much fruition. You typically need a second or third meeting to build that initial ground.

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