Benefits and challenges of internationalization
Posted: Wed Jan 22, 2025 3:29 am
3 minutes
Internationalization is one of the main reasons for undertaking a mergers and acquisitions (M&A) process, as it represents a safer way to gain size by acquiring a local partner who knows the domestic market, and it is a faster growth alternative compared to organic growth. However, like everything, it is not without risks. If you are exploring this alternative, we detail 5 benefits and 6 challenges to take into account to minimize risks.
M&A
Companies
July 16, 2024
Internationalisation is one of the main reasons for undertaking a mergers and Iran Mobile Phone Number Data acquisitions (M&A) process for two reasons. First, because it represents a safer way to gain size, by acquiring a local partner who already knows the domestic market; second, because it is a faster growth alternative compared to organic growth. However, like everything, it is not free of risks.
What are the opportunities and challenges that companies face when they decide to expand via a merger or acquisition of a foreign company? What elements must be taken into account for a successful cross-border operation?
5 Benefits of internationalization through M&A
The internationalization of companies through M&A offers a series of strategic, financial and operational benefits, among which we can highlight the following:
1. Diversification
The merger or acquisition of an existing company opens the door to a larger customer base and/or the marketing of new products and/or services. It is a diversifying strategy that is beneficial not only in terms of a potential increase in revenue, but also in terms of what is indicated in the second benefit of internationalization via M&A.
2. Minimize risks
As a result, diversification also involves risks. Diversifying operations in different countries protects the company from economic fluctuations in other markets, local regulatory changes and political instability.
3. Economies of scale
Cost reduction, process optimization, improved efficiency and the use of synergies are the main advantages of economies of scale that are achieved when increasing size. In this regard, in the case of manufacturers, the optimization of the supply chain by acquiring production, storage and distribution facilities in strategic locations is particularly important.
4. Access to new resources, innovation and talent
Natural resources and raw materials that can also diversify production, as well as access to new local talent that brings a different vision, which enriches companies. Access to new technologies and R&D capabilities that boost innovation, which is so necessary in these times, is also key.
5. Increased competitiveness
Undoubtedly, the acquisition of rivals or complementary companies strengthens the company's competitive position in the global market. In the first case, it also reduces competition.
6 Challenges of internationalization through M&A
As can be seen, the benefits of internationalisation through M&A are extensive, but so are the challenges. Beyond financial issues that, a priori, must be resolved before analysing other aspects, the main challenges are:
1. Regulatory
The main challenge of internationalisation through mergers or acquisitions is the regulatory issue, due to two aspects. The first has to do with the regulatory framework for M&A, which can complicate the compliance process, extend times and increase costs, as well as the conditions for approving the operation, which usually involve the divestment of assets to guarantee free competition.
The second has to do with local regulation of the activity. It is advisable to study all the legal implications (commercial, administrative, fiscal, etc.) to avoid future problems that undermine potential growth.
2. Cultural differences
Language barriers and differences in communication styles are increasingly taking a backseat, and cultural integration is the biggest challenge. This is no small matter, especially in companies that are beginning to internationalise. The fusion of different corporate cultures can generate conflicts and resistance among employees, affecting productivity.
3. Change management
There may also be resistance to change from employees, especially if they fear for their jobs or are not aligned with the new strategic direction. Retaining local talent is key to success.
4. Operational integration
Integrating different technological systems and operational processes is complex and expensive, requiring significant investments in IT and consulting.
Internationalization is one of the main reasons for undertaking a mergers and acquisitions (M&A) process, as it represents a safer way to gain size by acquiring a local partner who knows the domestic market, and it is a faster growth alternative compared to organic growth. However, like everything, it is not without risks. If you are exploring this alternative, we detail 5 benefits and 6 challenges to take into account to minimize risks.
M&A
Companies
July 16, 2024
Internationalisation is one of the main reasons for undertaking a mergers and Iran Mobile Phone Number Data acquisitions (M&A) process for two reasons. First, because it represents a safer way to gain size, by acquiring a local partner who already knows the domestic market; second, because it is a faster growth alternative compared to organic growth. However, like everything, it is not free of risks.
What are the opportunities and challenges that companies face when they decide to expand via a merger or acquisition of a foreign company? What elements must be taken into account for a successful cross-border operation?
5 Benefits of internationalization through M&A
The internationalization of companies through M&A offers a series of strategic, financial and operational benefits, among which we can highlight the following:
1. Diversification
The merger or acquisition of an existing company opens the door to a larger customer base and/or the marketing of new products and/or services. It is a diversifying strategy that is beneficial not only in terms of a potential increase in revenue, but also in terms of what is indicated in the second benefit of internationalization via M&A.
2. Minimize risks
As a result, diversification also involves risks. Diversifying operations in different countries protects the company from economic fluctuations in other markets, local regulatory changes and political instability.
3. Economies of scale
Cost reduction, process optimization, improved efficiency and the use of synergies are the main advantages of economies of scale that are achieved when increasing size. In this regard, in the case of manufacturers, the optimization of the supply chain by acquiring production, storage and distribution facilities in strategic locations is particularly important.
4. Access to new resources, innovation and talent
Natural resources and raw materials that can also diversify production, as well as access to new local talent that brings a different vision, which enriches companies. Access to new technologies and R&D capabilities that boost innovation, which is so necessary in these times, is also key.
5. Increased competitiveness
Undoubtedly, the acquisition of rivals or complementary companies strengthens the company's competitive position in the global market. In the first case, it also reduces competition.
6 Challenges of internationalization through M&A
As can be seen, the benefits of internationalisation through M&A are extensive, but so are the challenges. Beyond financial issues that, a priori, must be resolved before analysing other aspects, the main challenges are:
1. Regulatory
The main challenge of internationalisation through mergers or acquisitions is the regulatory issue, due to two aspects. The first has to do with the regulatory framework for M&A, which can complicate the compliance process, extend times and increase costs, as well as the conditions for approving the operation, which usually involve the divestment of assets to guarantee free competition.
The second has to do with local regulation of the activity. It is advisable to study all the legal implications (commercial, administrative, fiscal, etc.) to avoid future problems that undermine potential growth.
2. Cultural differences
Language barriers and differences in communication styles are increasingly taking a backseat, and cultural integration is the biggest challenge. This is no small matter, especially in companies that are beginning to internationalise. The fusion of different corporate cultures can generate conflicts and resistance among employees, affecting productivity.
3. Change management
There may also be resistance to change from employees, especially if they fear for their jobs or are not aligned with the new strategic direction. Retaining local talent is key to success.
4. Operational integration
Integrating different technological systems and operational processes is complex and expensive, requiring significant investments in IT and consulting.