February 28, 2017
In today’s political environment, cross border M&A is under more scrutiny than ever from governments, regulators and other interest groups. Deal success is no longer based on just the economic rationale, but political will, with multiple and complex groups of stakeholders needing to be won over. FTI Consulting looks at the dynamics at play and what companies need to do if they want to win the political arguments and get a deal over the line.
Governments are becoming increasingly proactive in how they interact with business, something the public has given them a clear mandate to do. National interest, always a hugely emotive area, has become an obvious target for this intervention. Not only is an anti-globalisation wave being ridden by politicians in both Europe and the United States, but the continued rise of new global economic powers, most notably China, and their use of state influenced companies to achieve policy is making cross-border business activity the front-line in today’s trade wars.
Against this backdrop, businesses have to meet ever higher demands in demonstrating that their ownership of local assets presents no threat to either national interest or security. For an individual company trying to rationalise and understand this backdrop against its own strategic objectives it can prove complex and opaque, however this should not be an excuse for inaction. Getting a deal successfully completed is about winning the argument, both behind closed doors and in public. Failing to be proactive not only increases the risk of failure, but heightens the possibility of reputational damage and unwanted aggressive scrutiny.
It is essential that businesses have a compelling narrative, but equally important is the ability to effectively communicate this to a wide audience of critical stakeholders, from regulators and politicians through to investors and the media. Successful engagement requires developing a core argument and rationale for support, while understanding that each market is different and in turn adapting to the political and business dynamics at play consistently and effectively.
Companies looking to complete a cross-border transaction must be prepared to defuse the heightened risk presented to their strategies by national interest motivated intervention. Companies must execute a strategy that utilizes a tailored, consistent narrative and a precise engagement strategy to navigate this complex landscape.
Executing a coordinated, cross-border communications campaign that engages stakeholders in a targeted, localized manner while also carrying consistent messages across all geographies, requires substantial organization and regional understanding. FTI Consulting’s global network is uniquely positioned to assist your company in making a deal a reality in this complicated marketplace.
“The idea of protecting domestic champions against foreign acquisition has made headway in Germany. The main parties are increasingly subscribing to the view that tougher review mechanisms for foreign acquisitions should be given to national governments and European institutions. This goes beyond security concerns. Coherent and credible messages to ensure political and popular support for international M&A activity is becoming critical.”
– Martin Kothé, Head of Public Affairs Germany Former spokesperson to Federal President Horst Köhler
“In this new environment, businesses must go into countries with a consistent narrative to explain their value proposition in a way that uniquely resonates with local decision makers. Having segmented strategies simply won’t work. It’s not just about meeting with a lawmaker or an investor – it’s a combined, all of the above approach. These emerging issues are multi-disciplinary problems with high-velocity political, regulatory, financial, and reputational issues on the line that equal the totality of what you are in a market. Businesses must have a team that fashions and cuts across all of those disciplines to get all communications, investor, and policy teams on the same page with the message and approach. FTI sits in the middle for our clients and manages the continuity and coordination.”
– Tom Crawford, Head of Government Relations, Washington, D.C.