How Much Do Regulatory Differences Impact International Mergers and Acquisitions?

As far as smart business movies go, buying or merging with a company in another country is usually up there at the top of the list. Unfortunately, it’s usually not easy, and what starts out as a deal with a lot of potential can quickly turn into an expensive headache. Usually, these problems happen because the rules from the two countries simply don’t match. Every country has its own regulations, and when those rules clash, you get complications. 

Perhaps there’s a limit in one country about how much foreign ownership is allowed, or maybe there’s another that has strict labor laws that force companies to keep staff after takeover. Even simple little details like having to get a local license can throw your timeline off and add another cost to the list. These aren’t just your small bumps that every business has, they’re things that reshape deals, force companies to give the whole thing up, or make integrations last for months. 

Regulatory Landscape in Cross-Border M&A

When companies buy or merge with businesses in other countries, they step into a totally different legal environment. These differences in regulations mean that business operations change from one country to another. 

In M&A, they can be a big deal. Some of the most common areas where rules differ are antitrust laws (which prevent monopolies), foreign investment limits, tax codes, corporate structures, labor protections, and requirements for licensing and certification. Each of these can have an impact on whether a deal is even allowed in the first place, how it’s structured, and how long it takes to get it approved. 

Government agencies play a big role in this process. Usually, they’re the ones that need to review and sign off before a deal moves forward. This means that a company might need to wait for months to get approval, plus they also need to prepare for extra paperwork or even deal with changes. 

Then there’s the legal system because countries like the U.K. or the U.S., which follow common law (e.g., U.K., U.S.), don’t interpret regulations the same as those that use civil law (e.g., France, Spain). This adds extra steps, and it can create confusion. 

For example, a company from the EU that wants to buy a company from the U.S. might face stricter antitrust reviews. This is especially the case in situations where a deal could impact competition. 

Even within a single country, rules can vary. In the U.S., for instance, state-level laws matter just as much, and licensing is the perfect example. If you’re working any type of blue-collar job (skill trade/trade job), you’ll need a valid license. And that is regulated by each state within the country. Requirements for electricians in South Carolina aren’t the same as ones in Florida.

If you’re trying to start a business as an electrician in South Carolina, you’ll have to familiarize yourself with South Carolina electrical license requirements, get prepped, study for the exam, pass it, and only then will you be able to work legally; plus, you’ll have to renew that license annually. 

In Florida, on the other hand, you’ll have to not only do all that, but you’ll also have to take up to 11 hours of continuing education prior to each license renewal. On the flip side, the renewal period in Florida will be every 2 years instead. 

So each state in the U.S. will have its own way of regulating licensing. Now mix in everything else that’s being regulated, and then put in the rest of the world. It very quickly gets extremely challenging and complex.

Where Regulatory Differences Hit Hardest

There are many regulations to follow, but not all of them cause the same amount of problems. Some of them are much more likely to delay deals, make them more expensive, or even stop them from happening. If you’re planning a cross-border merger or acquisition, here’s where you’re most likely to run into trouble. 

1. Antitrust and Competition Approvals

Every country wants to make sure that businesses don’t become too powerful, which is why they have laws to stop monopolies and protect fair competition. In the U.S., this is handled by the FTC or DOJ. In Europe, it’s the European Commission.  

If a deal affects more than one market, it’ll probably need approval from more than one country. The rules, risks, and deadlines are different everywhere. This means that a deal might pass quickly in the U.S., but it might drag on in the EU, or the other way around. 

1. FDI Restrictions

Some countries don’t want foreign companies to own too much of certain industries, like telecom, energy, or technology. This is because they’re seen as important for national security, and they’re called FDI (Foreign Direct Investment) rules. If there’s a chance that outsiders can get too much control, the government can block a deal. This has now become more common because of global tensions. 

1. Labor and Employment Compliance

Each country has its own laws about how companies have to treat their employees. For example, in France, it’s hard to lay off staff or change work contracts. In others, like the U.S., the laws are more flexible. These differences can cause problems after a deal is done, especially if the new owners want to restructure or cut costs. 

1. Taxation and Corporate Structure 

This is another area where countries play by very different rules. Some countries tax business profits more than others. There are also different rules on how money can be moved between countries or how to set up legal entities. But if you don’t plan this side of things carefully, you’ll end up paying a lot more than you were expecting to. 

Conclusion

The bottom line? Get ready for headaches and unexpected expenses because there’s a lot to follow here. The worst part is that, even if you plan everything carefully, the government can still ask you to pay something extra, they can delay your approval, or they can block the deal altogether. 

The best advice we can give you is to work with local experts, plan for delays, and keep your timeline flexible.

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