many cultures, especially Asian traditions, people are uncomfortable
responding to any request in the negative; they consider it rude.
So if you ask a colleague from China or Japan if she can get a task
done by the end of the month, she is likely to say “yes,”
even if she knows she will be unable to do so. Eugene Nesbeda, managing
director of New York City-based CITIC Capital Partners, explains
that it is better to avoid yes-no questions; ask, “When you
do think you can deliver that to me?” “It takes extra
effort to make sure communications are clear” when people
from different cultures try to do business, according to Nesbeda.
Handshake agreements and letters of intent may
be interpreted differently. In certain Latin cultures, for instance,
letters of intent are a mere statement of understanding, which may
be deviated from unilaterally if the circumstances change. A U.S.
party, accustomed to the rigidity of the terms of an executed letter
of intent, may be offended if the other party “changes its
mind” in the middle of negotiations. Continually checking
on the parties’ plans in the process of negotiations is a
key to the transaction’s success.
• Fact-gathering. Foreign
business reporting is often much less transparent than the U.S.
standards of financial and operational reporting. “At the
end of the day we see companies go over and apply their U.S. lenses
and make quick assessments that are very inaccurate,” warns
Nesbeda. For instance, while U.S. companies track their accounts
receivable in days (0-30, 30-60 and 60-90, for example), Chinese
companies age receivables by the year (0-1, 1-2, 2-3, etc.).
• Risk assessment. When
conducting a transaction with a U.S. company, you can fairly easily
project the future success of an alliance because of the relative
transparency of the information available. Not so with a global
partner! Before negotiating with an international party, review
the rationale of the business plan, including the assumptions behind
such a plan. Both parties’ agreement on this plan will help
keep the negotiations on track even without a firm letter of intent.
your partner's values
Given such cultural differences, it’s clear
that negotiations with non-U.S. parties must be handled delicately.
The respect given to each party’s values—especially
important in family companies—will be a factor in how the
transaction’s long-term success is judged. Those values may
include the following:
History. Look for clues as to whether a potential foreign
buyer will respect and honor your family business’s traditions
• Employee relations. How
important is it to you that a buyer keep your employees? How will
the foreign acquirer treat your employees? In China, companies tend
not to provide benefits such as health insurance or pensions. Japanese
firms, though, take an almost paternalistic approach; they treat
employees like family, tying them to the company for the long term.
• Customer relations. The
partnership approach to customer relations now in vogue in the U.S.
is not followed in certain other cultures. Does your potential global
partner approach transactions as a win-win situation, as opposed
to focusing on the one-time sale? Be sure to ask what the foreign
partner espouses, and call one or two customers to verify the answer.
• Community involvement. Will
your partner be a good corporate citizen? What is its track record
concerning the community and the environment?
There are many variations within cultures throughout
the world, so don’t just rely on broad generalizations about
a particular country. Ask potential foreign partners if you may
contact their customers and suppliers. Talk to these references
about each of the factors mentioned above.
In a very hot M&A market, sellers tend to focus on getting the
best price for their company. But it’s just as important to
seek out a comfortable cultural fit. As the owner of a family company,
you likely take pride in what you’ve built, and care about
what happens after you sell— to your employees, customers,
suppliers, community and overall legacy.
By François de Visscher