Macroeconomic conditions have opened the door for some domestic investors to stray outside of the border of the United States in search of value transactions. As a result of inflation, the war in Ukraine and uncertainty, currencies like the Pound, Euro and Yen have all fallen relative to the U.S. dollar.
“It’s interesting. It’s like a little bit of a perfect storm. I think you’ve had really two trends going on at the same time,” says Gary Blitz, global co-CEO, Aon M&A and Transaction Solutions. “The Pound, Euro and Yen all falling relative to the dollar has happened at the same time that the equity markets are down. So I think going into some countries, like the U.K., there’s tremendous opportunity caused by both of those things happening together.”
As a result of a renewed interest in cross-border M&A, dealmakers must take into account certain due diligence concerns related to such deals. Enhanced regulatory and tax issues are critical variables that must be considered. Blitz explains that tax insurance and certainty in tax outcomes are key concerns to note when pursuing cross-border deals.
Additionally, ESG strategies are at the forefront of due diligence requirements. “One element that has more prominence when going into the U.K. or Europe is ESG,” says Blitz. “There’s a much more heightened regulatory focus with ESG then I think in the United States. It’s still prominent, it’s talked about a lot, but it’s not as prominent from a legal and regulatory point of view.”
Blitz adds that while ESG has prominence on both continents, European regulators have been much more active than U.S. regulators in terms of ESG. As a result, it is important for cross-border dealmakers to understand the ESG baggage that is attached to certain cross-border targets.
What trends have you noticed within cross-border interactions and what kind of concerns do you have heading into the new year. Let me know at [email protected].
–Cole Lipsky
