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August 21, 2023

The Challenges of Cross-Border Deals

International business transactions often present unique challenges that are vastly different from local ones. The complexity increases exponentially when these transactions involve mergers and acquisitions (M&A). In this article, Clifford Felig, Partner at Meitar Law Offices, will discuss the challenges of cross-border deals, particularly in Israel, where he had most of his experiences. 

“Each country and business has its own way of doing business. There is no right and wrong. They've all succeeded in their own way, and you have to learn how to adapt to that.” - Clifford Felig

Challenges of Cross-Border Deals

  1. Negotiations - Negotiations can also differ depending on the country. In Japan, they will not sign anything during initial negotiations. Instead, upon reaching an agreement, they will go back to their company and get further instructions.
  1. Time Difference - As obvious as it may seem, a lot of people tend to forget or not care about the time differences. Acquirers must adjust their working hours to fit the target’s schedule. 
  1. Labor Laws - Employee protection varies throughout the world. There are different procedures when it comes to letting employees go, and a wrong termination could easily result in a lawsuit. 
  1. Indemnification Issues -  Most contract claims and other exposure have a seven-year statute of limitations in Israel. That can be an issue with buyers. 
  1. Price Negotiations - In Israel, they bring their lawyers during price negotiations, which is not a common practice in other countries. This can complicate negotiations when the other party doesn’t have a lawyer present. 
  1. Land Ownership - The vast majority of the land in Israel is owned by the government, and the people who own their land actually have long-term leases. Buyers may need to get consent from the government before closing the deal.

  2. Confidentiality - Traditionally, M&A thrives in confidential environments. However, Israel is very big on leaking deals which makes it difficult to keep transactions confidential. 

Through all these challenges, buyers must be flexible and adaptable to increase the chances of deal success. Forcing what they want will not be fruitful for both parties. 

Finding a Good Attorney

A recipe for success during cross-border transactions is a good attorney. They must be involved pre-LOI before any agreement is made. The lack of understanding of the local legal landscape can cause problems down the road. 

The best way to find a good attorney is through referrals from friends and reputable lawyers. Then,  cross-reference these recommendations with online directories. When evaluating these attorneys, industry experience is important. 

But even more important, is experience doing international deals. Not just someone who knows the local laws of the target country, but someone who has worked with a foreign client.

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