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The valuations of many companies have reached epic heights, and the tax reforms proposed by the Biden administration are expected to further increase the cost of mergers and acquisitions. But these clouds that are gathering do not dampen the enthusiasm of companies or their investors who wish to expand abroad.
In fact, it is quite the opposite. The value of global M&A deals hit a record $ 1.5 trillion in the third quarter of 2021, numbers not seen since before the 2007 financial crisis.
As the effects of the pandemic begin to wear off with widespread immunization, companies are pursuing aggressive growth strategies that increasingly take them beyond international borders. According to Dirk Albersmeier, global co-head of mergers and acquisitions at JPMorgan, international mergers and acquisitions are largely a pursuit built on trust.
Many companies believe they have the resources and a solid track record that will help them grow overseas. But how confident are their HR and accounting teams in their ability to handle the legal, regulatory, tax, benefits administration, hiring and payroll challenges that differ from country to country?
Understanding these challenges and taking action to address them is key to building confidence and expanding abroad without getting trapped by bureaucracy or violating local government laws, policies and regulations.
Navigate the world of mergers and acquisitions
Most countries have their own municipal, regional, and national regulators that impose statutory or regulatory filing requirements, which means relocating to a foreign jurisdiction while remaining compliant with the law can be complex.
Tax structures and benefit administration also vary from country to country, as do the conditions for opening bank accounts. Payroll is another obstacle course, as HR and accounting must determine which country to bill from – home country or overseas office – in what currency and who bills whom. These considerations vary depending on the countries in which a company wishes to operate and the reasons for doing business there.
In addition to these legal and compliance regulations are cultural norms and expectations regarding vacations, time off and promotions, all of which differ by country (and even by specific regions within a country).
A simple glimpse of the challenges is enough to erode the confidence of many HR and accounting teams when it comes to expanding overseas. Fortunately, there are partners and technologies they can leverage to take the friction and complexity out of the process.
The early stages
Human resources and finance departments are expected to be involved in cross-border mergers and acquisitions from the early stages of the deal, which includes the initial decision a company makes on what type of entity to set up overseas.
Opening new offices in other countries is the best path for some companies, while others choose a representative office, subsidiary, joint venture or partnership. Some companies forgo these structures and simply hire people or teams based outside of the United States.
HR teams should also understand the details of onboarding based on an employee’s job description and location, as these elements largely determine labor law, compliance, contracts, and other considerations. which must be properly set up before the integration can even begin.
Many HR managers approach these issues by purchasing reports that can help a company understand the ins and outs of benefits administration and other issues related to international recruiting. But these reports cost over $ 10,000 per country, and the help they offer ends where the book ends. However, the advice the HR department needs will certainly continue.
Where modern businesses find real help
It’s obvious that HR and finance teams often decide that regulatory and legal considerations related to cross-border mergers and acquisitions are too difficult to tackle without help. Getting help from the right partners and the right technology doesn’t just build trust, it can make the difference between success and failure.
Many companies partner with a professional employers’ organization (PEO) in countries around the world to help with entity formation, hiring, onboarding, benefits administration , compliance and other issues. PEOs, which have a field presence in countries around the world, offer more advice than reporting, as some of these organizations are present in over 100 countries.
There are also new technologies designed to facilitate international expansion, including second-tier HR software systems that can reduce many of the complexities associated with onboarding and benefit administration. Second-level systems handle all aspects of HR, including benefits administration, and some of these systems even have global reach.
Leveraging the right partners and the right technologies has never been more important than today, as the pace of international mergers and acquisitions is not expected to slow anytime soon. The labor shortage in the United States, combined with the pandemic’s “work from anywhere” trend, will only add fuel to the fire.
Expanding overseas is a game that takes trust, and there’s no better way to build trust than with access to the right tools and the right partners to ensure that a difficult task and complex is done well.
Adam Sheffield is the Director of Revenue at Global Upside Corporation.