Mergers and acquisitions
are one way that companies looking to expand internationally can break into overseas markets. Greece welcomes investment from overseas companies and has lawyers ready to help and advise interested parties on how to carry out a merger or acquisition in this country.
Benefits of mergers
As a business expansion technique, mergers and acquisitions (M&A) can offer companies a number of advantages:
Consulting with local lawyers is essential
- The company acquires or joins with an existing business that already has its own skilled and experienced staff and therefore boosts the acquiring company’s knowledge base.
- It increases the acquiring company’s customer base and provides easy access to a new market.
- The new company may have new technologies or patented products that the acquiring company might not be able to access other than through a merger or acquisition.
- The target company often conducts the same type of business as the acquiring company, and so the acquisition or merger can help to reduce competition and increase the company’s market share.
However, although mergers and acquisitions can be an effective way of expanding a business, they are not to be entered into lightly. They can be very complex legal arrangements with many potential pitfalls or roadblocks to catch out an unprepared company, particularly if they involve overseas companies. Problems that could potentially arise and may need specialist legal advice to resolve include:
- What to do with existing staff of the acquired company? There may be a duplication of roles as a result of the merger or acquisition and as a result some staff may become surplus to requirements. However there are European laws, such as the Transfer of Undertakings (Protection of Employment) Directive, that govern how staff in this situation must be treated.
- Failure to fully understand and comply with the different rules governing business operations in a foreign country.
- Failure to fully research the economic viability of the target company, including all its assets and liabilities.
The rules governing the merger will depend on the countries involved. Any company considering a merger or acquisition with a company based in Greece is strongly advised to seek professional advice from local lawyers. It can be difficult for any company to try and do business in an overseas market – they need to understand and adapt to local rules and customs, and also be able to identify the right entry strategy into the country. Law firm Kosmidis & Partners has lawyers who are fully experienced in all aspects of Greek merger and acquisition law and will be able to guide any overseas company through the process.
Positive signs for mergers and acquisitions
As with many countries, merger and acquisition activity in Greece has been subdued over the past few years as a result of the global economic downturn. However, recent improvements in the global economy have led to increased confidence amongst businesses, and as a result they are more willing to consider the possibility of mergers again.
Recent figures from business advisors EY
have revealed that 87% of companies now consider the global economy to be either stable or improving. The figures also show that 51% believe the global economy to be improving outright – more than twice the 22% that reported the same in October last year.
In addition, this rising confidence has led to many global companies now believing that M&A activity will increase over the next 12 months – as many as 72% expect to see an increase in the volume of global deals over the next year.
However, EY also found that this increased confidence has yet to translate into action. Its survey found that although 52% of major companies cite growth as a priority, only 29% say they expected to actually make an acquisition over the next year.
Despite this lack of planned action, many companies acknowledge that now is probably a good time to conduct a merger or acquisition. EY found that 39% of companies believe there to be quality acquisition opportunities currently available, which is an increase over the 30% that believed the same six months ago. In addition, 50% report feeling more confident about the volume of merger opportunities available, compared to 37% six months ago.
The fact that there is a growing number and higher quality of merger and acquisition opportunities leads EY to suggest that now is a good time to conduct a deal, and that companies that are the first to act will reap the rewards.
“There are signs of improvement but caution remains,” explained Pip McCrostie, EY’s Global Vice-Chair, Transaction Advisory Services. “While almost three quarters of corporates expect deal activity in the market to increase over the next year, far fewer have an intention to buy. This could actually create a first mover advantage opportunity for those willing to take action and secure assets ahead of the competition.”
Greece as a M&A destination
For companies already based within the European Union (EU) or the European Economic Area (EEA), Greece offers an ideal destination for international merger activity, as companies will be able to take advantage of the preferential trade conditions that exist between EU and EEA countries. Laws already exist to facilitate cross border operations between EU countries, including rules relating to the transfer and employment of workers, debt recovery and dispute resolution
Professional services provider KPMG has also found positive economic signs regarding M&A. Its latest global M&A predictor found that confidence amongst the world’s largest companies was 14% higher than it was at the same time last year.
“The evidence from the top 1,000 companies is that while confidence is fragile, it is there, and this is reflected in average (as opposed to total) deal values, which continue to increase.” commented Tom Franks, Global Head of Corporate Finance at KPMG.
Although the surveys conducted by the business advisory firms were focused on the larger global corporations, the favorable market conditions are equally applicable to smaller and medium size businesses.
Mergers can be particularly beneficial for these companies, as they are less likely to already have an international presence. M&A can offer a potential solution for firms that are keen to take advantage of a wider international customer base but have not yet been able to find the right way to break into the cross border market.
If your company is ready to take advantage of the current favorable conditions for mergers and acquisitions, then contact Kosmidis & Partners today and let our lawyers advise you on the appropriate requirements of Greek law.