In a globalised environment, large companies have expanded not only by selling/exporting goods and products, but by establishing offices in the countries and markets where they want to do business. This growth can be achieved by creating subsidiaries or by acquiring local companies to develop.
In the case of retail companies, the expansion strategy is to create their own subsidiaries that apply the parameters of the parent company. Our country brand is INDITEX with more than 150 subsidiaries in as many countries. It is a valid growth model since the buyer is the consumer (B2C models) and the purchase parameters are relatively similar, with garment design and supply chain logistics being critical.
For capital goods manufacturers, international expansion usually requires significant investment and, in addition, a much longer breakthrough time. They are business models based on the fact that the customer is another company (B2B model). In these cases, it is more advisable to enter the market by acquiring a local operator who provides local know-how and a network of contacts or goodwill. Everyone can call to mind the purchase of Spanish companies by German, English, American and, lately, Asian industrial groups.
These are operations in which the expansion is carried out through the acquisition of another company or through joint venture agreements or other strategic alliances that involve long-term commitments and provide value to both the seller and the buyer.
For a shareholder who is considering selling the company, the advantages of such an operation are obvious. After many years of personal sacrifice at the head of the company, significant capital gains can be earned from selling the shares and, in addition, in many cases the seller can remain active for a certain period of time by collaborating as an advisor or as a director of the company. It can certainly be a form of business handover that facilitates distribution among the children or family members involved. Employees will become part of a group that is more resilient in the face of economic crises, and for customers and suppliers it will surely allow them to access other markets.
For the acquiring group, this is a strategic operation that will provide it with synergies in the form of qualified technical personnel with knowledge of the product and the market, recognised distribution channels, and assets in operation that it will be able to integrate into the whole with the corresponding advantages provided by the larger size.
Key factors for the success of corporate operations
The will to carry them out is fundamental but not sufficient. Resources are necessary to carry them out, especially professional teams. Financial resources, while important, are more accessible if there is an in-depth analysis of the Business Plan to be developed. These teams of business analysts, auditors and lawyers specialized in Due Diligence and acquisition contracts used to be typical of large corporations. Today, they can be consulted for a particular operation, which makes it much easier to carry out these operations and, in turn, reduces the level of risk involved. The way of approaching these processes have become more accessible because the processes used by big multinationals have been adapted to the dimension of the medium size companies, which need them most, and the ones which get more added value both if they are buyers and sellers, since they are WIN-WIN processes.
COMPAS PROFESSIONAL EXPERTISE, S.L.P. A team of corporate operations specialists.