International mergers and acquisitions (M&A) blend company resources, personnel and assets to help a business stimulate growth, gain competitive advantage and strengthen chain supply
Unfortunately, M&As are complex, especially when the company you want to buy is in a foreign market. Similarly, there’s a lot to consider, such as accounting considerations, cash, stock and regulatory compliance.
Luckily for you, the Seamless brand understands international M&As and can help your organisation find reliable end-to-end solutions for global operations. Below, we’ve compiled a detailed guide to help your company with its M&A overseas.
International mergers and acquisitions
Companies that wish to buy foreign companies need Transitional services agreements (TSAs) for a smooth HR transition. But, what exactly is a TSA?
A transitional service agreement is an arrangement made between the buyer and seller of a company after the sale of a business. In the arrangement, the seller agrees to provide a set of services to the buyer at a certain price and for a certain period. These services include IT, HR, finance, accounting and other relevant infrastructure needs.
The main goal of a TSA is to ensure an orderly administrative transition for the buyer company. It also provides operational continuity while both parties continue untangling joint operations. All in all, TSAs go a long way in creating a smoother transition for buyers who don’t have the means to absorb all aspects of the M&A immediately.
This way, by the end of the TSA (usually six months), the purchasing company is in a stronger position to provide admin services to the staff that the seller previously provided.
Challenges with transitional service arrangements
Although TSAs can facilitate a deal between a buyer and seller, they present numerous complexities and complications that both parties don’t always receive well. These challenges make international M&As more stressful and difficult, causing companies to shy away from buying businesses in a foreign market.
Some of these challenges include:
1. Challenges for sellers
With TSAs, the selling company must devote internal payroll, HR, and accounting resources to the purchasing organisation. Unfortunately, this means that although the M&A is closed, the seller has to continue using their time, money and resources to help the buyer until all administrative ties are severed. This link can take a toll on the selling company in many ways, including:
• The seller maintains liability and responsibility for employees that are no longer part of your team.
• The seller has to divert internal resources to the buyer’s staff, which can be costly.
• The seller faces accounting challenges such as undocumented expenses that misalign department budgets and cause accounting reporting issues.
2. Challengers for buyers
As a buyer with a TSA, you have to determine essential and ancillary services, the costs of the seller’s services, and their service standards. Seeing as it’s an international M&A, identifying these can be a bit difficult. Other challenges you may face as a buyer are:
• Your company doesn’t have 100% control over new staff and cannot hire a new workforce.
• Your organisation has to rely on the seller to take on the liability of new employees, which only creates additional complexities.
3. Challenges for both buyers and sellers
TSAs often confuse both parties’ staff members. This is because it’s quite unclear who they work for and when they will be integrated into the new organisation. While the buyer is on a new path, they’re stuck with a legacy structure, which includes payroll, HR and other systems.
Additionally, the buyer has to establish compliant payroll processes such as opening a local bank account, and this is time-consuming and stressful.
Many buyers often don’t choose the TSA route because of all the complications that come with it. Unfortunately, this means it’s negotiated last minute when buyers realise they don’t have the administrative bandwidth required to onboard acquired employees. This results in:
• A continued link that neither party wants
• An expensive deal for the buyer
• A stressful and overwhelming situation for the buyer and seller
Overcoming TSA challenges
It’s possible to overcome all these challenges by working with an experienced global expansion expert like Seamless.
At Seamless, we offer a wide range of global expansion services that are focused on streamlining your global operations. From managing employee transfers and payroll to HR and other vital M&As considerations, we’ll help your organisation navigate your international merger and acquisition and provide you with the right support to complete the transaction smoothly.
Contact us today to streamline your international M&A with our experienced professionals.