1. January 2017

Zoé Constantin, director at RSA, sheds light on the specificities of cross-border transactions, namely for investors interested in the French and German markets.

Where do cross-border investments in France originate?

France still features in the leading group of European countries in terms of appeal to foreign investors, in third place after Great Britain and Germany. Some 60% of direct overseas investments in France come from industrialised countries. Currently, the major investors are American (20%), German (15%), British (8%), Italian (8%) and Japanese (8%) companies. (Source: Business France).

photo zoe


What type of investments are we talking about?

According to Business France, 50% of investments in 2015 comprised company start-ups, about 40% were expansion projects and 10% were attributable to business renewals (in all, 33,000 jobs were created or consolidated). The most attractive sectors in recent years have mostly been industry, IT service providers as well as research and development.

What particular features have you noticed in the context of Franco-German transactions?

There is a strong economic tie which links France and Germany, and this serves to create opportunities. However, each opportunity also presents a risk. The number of German companies taken over by French ones has increased greatly and has reached a record high. For several years now, more French companies have been acquiring German ones than vice versa. This is proving to be a trend on the rise.


For a successful German acquisition, certain factors need to be taken into account:


Where large numbers of German SMEs are leaders in niche, highly specialised markets, they might not to have a strong presence abroad. They sometimes still depend on local markets. Often this is the case with sound family businesses which enjoy a regional foothold and strong values; concluding a successful transaction with them may require patience and perseverance.

German SMEs and middle-market companies, who generally possess solid financial resources, tend to favour ties with strategic investors. However, private equity players have succeeded in penetrating this market and capital-investment operations in Germany have demonstrated a steady rise since 2009.

German companies favour family-based successions in over 50% of cases (contrary to 10% in France) and any possible company’s sale has the best chance of success at the time the company director retires.

As with any cross-border transaction, there is a need to correctly anticipate the tax impacts in order to find a plan which suits all parties. This may require more time.

What do you think are the factors which contribute to the success of a cross-border transaction?

Depending on the country in question, it may be necessary to carry out negotiations in the language of the country of the acquisition, particularly in order to best assess the mood of the vendors.

It is vital that this be carried out with experts on hand. They will be able to guide you through the fine cultural and legal details and the manner in which negotiations and business is conducted. You should not underestimate the psychological and cultural factors which come into play during a cross-border transaction. Stereotypes are stubborn and may inject a mood of defiance which could prejudice the transaction.

As with any transaction, success is not merely the natural consequence of signing transfer agreements, but also hangs on the achievement of synergies. To bring about those identified during the  due diligences and to achieve integration, there needs to be a clear pathway with dedicated project managers, who will be in charge of achieving these synergies.


What mistakes – on the vendor’s as well as the purchaser’s side – can cause a deal to fail?

Not having a grasp of the information on target countries where deals are directed (market potential, business operations, legal aspects, etc.) as well as a knowledge of the local culture.

To get the best result from an overseas acquisition, the international approach needs to be fully integrated in the strategic plan of the acquirer. An organisation needs to be built with dedicated employees and financial resources to provide appropriate intercultural contexts for staff mentality and working practices, etc.


About the author

Zoe Constantin has over 15 years of experience in Corporate Finance, aiding financial and strategic investors with crossborder transactions. Franco-German by birth, she has spent several years working in Germany, German-speaking Switzerland and Austria, as well as Eastern Europe. Today, working from France, as Director at Rsa, she advises French and international clients on their development via the German Desk at Crowe Horwath France, which she co-founded with other Franco-German members of the network.



Interview réalisée par Drooms et publiée sur le blog de Drooms.