The Right Way to Handle Cross-Border Tech Acquisitions
A cross-border acquisition is a process through which an entity acquires another entity or business from another country. Given the fact that technology has a global nature, the process of acquiring a technological company often implies numerous cross-border elements.
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Challenges of cross-border technology acquisitions
When dealing with such an acquisition it is safe to start from the assumption that none of the usual rules applies. The complexity of the transaction can and will often put a great burden on an in-house counsel. The best thing to do is assess potential problems as soon as possible.
How to handle cross-border transactions
The complexity of a cross-border acquisition requires careful planning and consideration. The process was best explained at the Association of Corporate Counsel March 2017 CLE event. White & Case LLP, one of the most reputable international law firms, put together a thorough presentation on Managing Cross-border Acquisitions of Technology Companies. The presentation was managed by Jason Rabbitt-Tomita, Carrie LeRoy and Michelle Sayer, a team of respectable practitioners with extensive experience in cross-border transactions. Their presentation provided a framework meant to guide an in-house counsel through the complexities and challenges that are usually encountered with such a transaction.
- Process and timing challenges – There are some general challenges that can affect the timing of such an acquisition such as local taxes, delays caused by time zones or local holidays, currency fluctuations and so on. The process and timing of the transaction can also be affected by corporate approvals, public company transactions.
- Due diligence – It is important to research everything that needs to be known at each step of the acquisition process and this applies for everything from the FCPA requirements, privacy and security issues, IP issues and so on.
- Intellectual Property – There are two cross border licensing models that you need to consider. Firstly, you must maximize the value of the Intellectual property through limited fields of use, capture period for patents, and term license models. Secondly, you must ensure the freedom to operate through a grant license for specific business regions, fully transferable rights, and the right to enforce against infringers of the acquired entity.
- Regulatory approvals–To ensure proper approvals, the councilneeds to prepare for Antitrust reviews, CFIUS scrutiny, NDRC, SAFE and MOFCOM approvals (when the republic of China is involved), as well as any other regulations that can affect the transaction.
- Employment considerations – Local jurisdictions can sometimes make it difficult for foreign buyers to implement their own employment plans. This is particularly true for employee terminations which can be costly and administratively challenging. Moreover, European employee regulations can significantly affect cross-border transactions.
- Dispute resolution – With such complex transactions, disputes are inevitable, so it is best to determine from the start whether to deal with disputes through litigation or through an arbitrary provision.
Tax considerations – Last but not least, when it comes to tax systems, the main factor that dictates the tax structure is whether or not the buyer has operations in the country where the transaction will be made.
Author: Christine David
