The COVID-19 pandemic stalled economies worldwide and caused M&A activity to freeze following a record run. Transactions slowly started to resume in recent months, and finance and HR executives must prepare their companies to navigate unique compliance risks and operational challenges associated with cross-border M&A in unstable markets.
Annie Thompson, VP of Strategic Partnerships at Velocity Global, worked with Saul Howerton, VP Advisory at Vistra, and Roman Villard, Moderator, and Director of Business Development at AVL Growth Partners, to lead a webinar discussing the ups and downs M&A transactions faced this year. The webinar also addressed findings from the recent CFO Research-Vistra report and trends in the current M&A landscape.
Learnings and Takeaways From the CFO Research-Vistra Report
Saul Howerton, Vice President, Advisory at Vistra, began the webinar with a discussion about a survey CFO conducted in January and April of this year: Cross-Border Operations: Regaining Momentum in 2020 and Beyond.
Howerton noted that companies remain confident moving forward with their planned M&A transactions, even in the volatile economic market that the COVID-19 pandemic created. He also pointed out that the pandemic forced companies to:
- Closely examine the impacted supply chains of certain countries.
- Reconsider expansion locations due to economic and political instability.
Annie Thompson, Vice President of Strategic Partnerships at Velocity Global, then gave attendees a detailed look at why companies still feel confident in M&A activity and how PE deals shift in terms of structure and timing. Both Thompson and Howerton highlighted how COVID-19 lockdowns and restrictions forced employees to work remotely. Because so many workers are now remote, using a flexible global employment solution like an Employer of Record (also known as International PEO), rather than establishing a legal entity, provides a company with more freedom to hire remote workers in different locations.
How an Employer of Record Helps Companies Overcome M&A Complexity
Thompson and Howerton then spoke to the strategies that companies use to mitigate risk in turbulent markets. In times of economic unpredictability, Thompson noted that it’s important for companies to look at every global employment option and choose the smartest investment.
For example, if a company has 20 employees in one country, it is smartest to establish a legal entity in that market. But if a company has ten employees in ten different countries, establishing multiple legal entities is expensive and time-consuming. In this case, it’s best to turn to a flexible employment solution like an Employer of Record. Companies that utilize this solution hire employees in different markets quickly, compliantly, and without establishing an entity.
Thompson also noted that buyers must maintain a larger company’s culture when they have employees working in different countries or smaller branch offices. Buyers must be completely transparent with global employees throughout the transfer process to maintain a positive company culture.
Considerations for Carve-Outs and Employee Transfers
Thompson then discussed the common challenges companies face in the employee transfer process during carve-outs. Firms usually struggle to understand local laws and regulations and how they impact transaction agreements and benefits for their foreign employees.
Howerton noted that immigration issues and any problem involving the local authorities slow down M&A transactions. Buyers must consider this potential delay for employee transfers and the transaction timing as a whole.
Streamline Company Operations in Cross-Border M&A Transactions
Thompson and Howerton wrapped the webinar by explained how Vistra and Velocity Global partner to provide the best solutions for growing companies acquiring new assets and employees overseas. If you could not attend the webinar, click here to watch it in full. If you’d like to learn more about how Velocity Global’s experts help PE firms navigate cross-border M&A HR challenges with ease, contact us today.