Cross-border M&A is like a journey: to be successful, it requires solid preparation, adaptability and the right guidance.
Eight Advisory Financial, Tax and Corporate M&A experts have written a Transatlantic M&A Playbook. This strategic guide decrypts the key financial, tax and legal differences between mergers and acquisitions in the United States and Europe from preparation to due diligence to signing and closing.
This resource helps investors prepare for cross-border ventures, navigate complexities, and unlock value creation. It covers everything you need to know to manage risk, ensure compliance, structure tax efficiently, and seamlessly adapt to cultural nuances.
Early-stage negotiations require a clear understanding of cultural and jurisdictional nuances.
In Europe, negotiations tend to be more formal and relationship-based, with a strong focus on building trust and ensuring regulatory compliance. By contrast, negotiations in the United States are generally more direct, results-oriented and pragmatic.
U.S. law does not always impose a duty to negotiate in good faith, unlike many European systems.
The structure of the deal (share deal vs. assets deal) and applicable tax regime (opaque or transparent) directly impact tax liability inheritance.
NDA drafting and applicable law must be adapted to the nature of the parties and assets involved.
Due diligence in the U.S. differs significantly from European practices.
In Europe, due diligence typically adopts a business-oriented and operational lens, involving extensive analysis of business trends, growth drivers and sector risks. Whereas in the United States, due diligence commonly center on financial metrics, with a focus on quality of earnings.
U.S. targets often lack audited financials and may use cash accounting.
Key tax risks include sales tax nexus, interest deductibility, and transfer pricing.
Accounting frameworks and EBITDA definitions vary, impacting valuation.
The signing and closing phases involve complex legal and tax mechanisms.
Pricing mechanisms differ (locked box vs. completion accounts) and affect risk allocation.
Foreign investment reviews (e.g., CFIUS) may delay or block transactions.
Tax structuring, management packages, and goodwill amortization must be addressed as early as possible in the process.
In Europe, share deals are the norm and tax liabilities are transferred. In the US, however, asset deals are more common, allowing goodwill to be amortized over 15 years.
In conclusion,
robust legal coordination is necessary to avoid obstructions and meet deadlines,
advance tax planning and tax structuring are instrumental in minimizing expenses and optimizing post-agreement synergies,
support from advisors with both local and cross-border accounting and financial knowledge guarantees key potential risks and opportunities are addressed,
thorough due diligence is essential to ensure informed investment decisions.
At Eight Advisory, our experts support dealmakers on both sides of the Atlantic every day. Download our playbook to learn more: click here.
Louis Legros is a Transaction Services Director at Eight Advisory in New York. He provides transaction-related financial services to European clients in their international development as well as to US companies investing locally or in Europe. Eight Advisory is an independent financial, operational, and strategic consulting firm with global reach, specializing in Transactions, Restructuring, and Transformation. Visit our website: click here
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