Just a decade after the end of World War I, in 1929, a British company named National Smelting Company was acquired by another company within the same segment called Imperial Smelting Company. Sophisticated mergers and acquisitions had taken place since the 1870s, when the Pacific Coast Oil Company had merged with Star Oil.
What made this acquisition a little more unusual was that Imperial Smelting Company was an Australian company—and National Smelting Company was a British company. The acquisition represented one of the earlier significant cross-border transactions in the history of mergers and acquisition. In the same year, British company Lever Brothers merged with Dutch company Margarine Unie to form Unilever. Unilever engaged in a number of cross-border transactions in the 1940s, two of them with US companies Frosted Foods and Pepsodent. But it took another forty-five years after the merger of National Smelting and Imperial Smelting for a blockbuster cross-border transaction to take place. This time it was the merger of British company Unilever with US-based company National Starch & Chemical in 1974.
Fast forward, though, another some 45 years into the future, to one spring morning in 2018, when I walked into my office in Greenville, South Carolina at 4 a.m. to start the formal closing process of a cross-border transaction on behalf of a global electronic components manufacturer named AVX, headquartered in South Carolina. Acting for AVX, my firm, along with our partner firms based overseas, completed the acquisition of a dozen different entities in seven countries by 9 a.m. that morning.
The deal required more than six months of complex planning and carefully orchestrated coordination on the closing date—not made easier by the need for corporate actions to occur simultaneously in time zones from India to China to the UK to Mexico—and a deadline to complete everything before the NYSE opened in the U.S. Despite the complexity involved and real-time communication required with our partner firms “on the ground” in seven countries to complete the transaction, it was not a particularly unusual transaction, considering the times. Today, cross border transactions take place with amazing frequency.
What has led to the amazing ease with which cross-border M&A transactions can be conducted around the globe, so seamlessly and so frequently? There are a few newer, regional policies that have made things simpler in cross border transactions, such as the European Economic Community (EEC) opening of internal borders in 1992 for countries in Western Europe. On the other hand, cross border M&A has become more difficult in other respects — for example, the number of jurisdictions with merger control regimes has more than doubled from approximately 70 in 2006 to more than 150 in 2018.
What, then, explains the exponential increase in cross-border M&A deals over the past 25 years after a slow beginning?
Three very simple changes have taken place in business that have driven the increase in cross-border M&A. In fact, these changes underpin the increasing globalization of business generally.
1) A common business language
Throughout the six months of pre-planning and coordination for the AVX acquisition, I spoke (in English)—often daily—with attorneys in Germany, Austria, Romania, India, China, and Mexico. English is increasingly the common language of global, multi-country business transactions. When working on international deals, it is incredibly easy to reach out to partner firms across the world – whether in Asia, South America, or Europe, and to find attorneys who are accustomed to working with US companies and transacting business in English. As U.S. lawyers, we benefit from the versatility of foreign firms, and the versatility of lawyers who can both work with local business executives in the local language and transact cross-border business in English (and often, multiple other languages). Without a common language, coordinating the logistics of an M&A deal involving many countries—simply conducting conference calls with all of the foreign firms involved—would be difficult.
We tend to take for granted the fact that by and large, most people in business are able to communicate with one another, despite the different countries of origin, in a few common business languages. Today, business is conducted around the world among different countries, different industries, and different types of professionals with ease. Spanish is the common language of some twenty countries. French continues to be a common language in many European countries, and in some African and Mediterranean countries. In countries or regions with multitudes of regional languages and dialects (such as India and China), a language of business will emerge.
Ease of cross-border transactions requires a common business language. And while it may be a U.S.-centric trend for large, global deals with a U.S. acquirer or significant U.S. component, English becomes the common language currency of the deal.