How to Sell Your Business Internationally – With Legal Tips From M&A Counsel

The beauty of founding a SaaS business is you can operate it from anywhere in the world. Whether you’re in Bali, the US, or Buenos Aires, all you need is a computer and an internet connection. Okay, you might also need employees, offices, and so on, but you get the picture – SaaS is global.  

Over half a billion entrepreneurs found and acquire businesses across the world and reaching them has never been easier. You’d be foolish to ignore such a massive market when selling your business. Maybe founders do, however, fencing themselves into their local country’s buyer pool. 

Selling internationally can feel overwhelming, especially if it involves speaking other languages. But the bigger your buyer pool, the better your chances of getting acquired. And while we make that easy by connecting you with over 500k buyers, you might wonder what an international transaction involves.

Selling a US company to a buyer in Australia or the UK might be relatively straight forward. But what if you’re selling to someone in Vietnam or Spain? How do you vet and negotiate with people who might not speak your language? What laws apply to your transaction? Whose help might you need?

In this article, I’ll explain the general process of selling your business internationally with examples from the M&A team. This isn’t a tutorial per se but an introduction to the various aspects of selling a business across borders. Always consult with your M&A advisor or attorney.

The M&A team speaks multiple languages (such as Spanish) and has helped close many international transactions – even when the buyer and seller couldn’t talk to each other without a translator! You get free guidance as part of your acquisition plan, so if you’re unsure, ask for help.

Vet International Buyers Carefully

Once you finish working on an exit plan with your M&A advisor, they’ll take your business to market. then presents your listing to buyers from 100-plus different countries. At over 500k registered buyers, we probably have one of the biggest buyer pools on the planet.

Some buyers might not speak your language. They may use Google Translate or some other software to evaluate the fundamentals of your business. Don’t be put off if you get multiple inquiries from overseas. Encourage them, and work with your advisor to vet each buyer carefully.

How might this work? First, check they’ve verified their identity and funds. Our partner Persona verifies government-issued identity documents and asks users to take a selfie to confirm their likeness matches their ID. Our finance team also verifies proof of available funds and states the amount on the buyer’s profile. Both verifications are optional, however, so you may need to ask buyers to do them. 

Next, search their name using Google or another search engine. Apply the same principles as you normally would when vetting buyers but dig a little deeper. If you can’t find any web presence verifying the buyer’s background and experience, it’s a red flag. It’s perhaps more common for older folks, but it would be hard to get by in business these days without at least some web presence. 

Once you’ve found them online, research their reputation and operational history. What do people say about this person online? Who have they worked with? Have they acquired a business before? What skills and experience do they have? Where have they worked? Determine if this person’s expertise and reputation constitutes an acceptable risk before taking acquisition talks further.

And when you get to the closing stages of your acquisition, always use escrow. Both our escrow partners, and SRS Acquiom, will do the necessary checks against anti-money laundering (AML), terrorism, and criminal databases involved in a process known as KYC (Know Your Customer). You don’t want to sell your business to a criminal, sanctioned party, or politically-exposed person (PEP).

Why is vetting your buyer so important? It tells you whether the buyer can close and if they have the necessary expertise to earn a return on their investment. It might not matter to you once the money changes hands, but you’ll be on the hook during the transition period and representations and warranties survival period after closing. Who do you think the buyer will blame if things go awry?

Legal remedies will be harder to achieve, action may take longer, and it might be more expensive. Perhaps not so much if you’re selling to someone in Canada or the UK, but if the buyer’s jurisdiction is somewhere with a less-clear legal framework, it could get a bit complicated. Bear that in mind. 

Get Ahead of Local Laws

Local laws can seriously hamper your expectations when selling your business internationally. Not just the bottom line number, but also the process itself. Some countries require extra steps and more time to complete them. If you don’t consider or plan for these laws, you may be unpleasantly surprised.

Consider Your Local Tax Rate

One of our recent eight-figure acquisitions (we can’t name it due to being under NDA) involved a Finnish founder selling to a US buyer. Scandinavian countries tend to charge a tax rate. The seller never spoke to a tax attorney or CPA until the closing deadline, realizing late that they would receive much less in their bank account than they thought. The effective tax rate was around 60 percent, almost killing the deal. Thankfully, Paul Kelly, our VP of M&A, helped the buyer and seller settle on a creative deal structure that split the payments over a few years to minimize the tax impact. 

If the seller had researched tax obligations in their own country, they would’ve known what to expect when selling to the US buyer. They might’ve avoided the last-minute bump, saved a lot of stress, and avoided jeopardizing the deal by slamming the brakes on the buyer’s acquisition. Without Paul’s help, the buyer might’ve pulled their offer or the seller may have given up on the transaction completely.

Local tax rates influence the amount of cash you get after the deal closes. Ask your CPA or tax attorney to run the numbers first so you don’t throw a spike under the wheels of your international acquisition just when it’s gaining momentum. Your deal might not recover.

Will You Need to Create a New Entity?

Another example of local laws complicating a founder’s exit was the recent acquisition of SwearIt, a blockchain authentication company based in Spain. The buyer wanted to acquire the company’s stock under a US entity, but Spanish law required him to set up a NIE (a Spanish tax ID). Each step involved booking government appointments and submitting documents notarized by an apostille in Spain. The acquisition took months to close and might never have been possible had President Rosa Romaine and I not guided the deal and translated for each party. 

In some cases, you might need to organize a new entity to process the acquisition, though it’s rarer on the sell-side. Maybe you’re located somewhere a little more risky for a foreign buyer or the buyer doesn’t comprehend or want to deal with the business regulations in your country. For example, a Romanian company on set up a Delaware LLC after receiving feedback from multiple buyers that they’d only be interested if they didn’t need to deal with the Romanian legal system. 

Word of warning, however. If the buyer wants you to set up a new entity to make their lives easier or create better conditions for the acquisition, ensure they’re committed to closing. You don’t want to transfer all your assets to a new entity only to transfer them back again if the deal fails. Do your buyer due diligence and ask for assurances that the buyer is serious. You could formalize it as a condition to the APA so you’re both committed – you to creating the entity and the buyer to the acquisition.

What About Your Deal Structure and Currency?

Similarly, consider the impact of an international acquisition on your deal structure. If you’ve offered seller financing, for example, will the loan be serviced by the cashflow of the business? How will they repay if not? Will they borrow more money to serve the loan you’re giving them? You may need to take a security interest in the assets, which will involve researching how this works in the buyer’s country.

Currency risk also factors into your payment. You’d be surprised how many buyers haven’t considered your local currency and say things like, “Oh, I thought you meant Canadian and not US dollars.” It’s uncommon, but it happens, and buyers might use it to push down the price. You might benefit from negotiating your whole transaction in USD since it’s the world’s reserve currency. 

That said, currency fluctuations might also impact the cash hitting your account. You might agree to  a purchase price in USD, but the exchange rate will impact how much local currency you receive. But negotiating in USD is still preferable to volatile currencies like the Argentinian Peso or Venezuelan Bolivar, which can quickly lose value due to hyperinflation. 

The moral of these stories is to get ahead of local laws early. Speak to your M&A advisor and ensure you’ve hired counsel and tax specialists to evaluate the offer. If you live in Madrid and your buyer is in Kansas City, like in SwearIt’s case, don’t expect the buyer to know what’s expected of you. 

When working with our international M&A team, the chances of you needing to pursue a legal remedy across borders is low. The bigger risk is not getting paid for your assets, which goes away when you use our escrow partners to close your acquisition safely. But let’s say something does go wrong. What then?

Disputes during in-country transactions such as those in the US are usually easy to resolve. If the buyer never pays you for meeting an earnout condition, for example, you could sue them to obtain a judgment relatively quickly. And, generally, it is much easier to find an attorney in your home country.  But if the buyer is outside of the US, it’s going to be much harder to enter a judgment let alone find an attorney to perform that legal work to begin with.

Most Western countries are party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (abbreviated to the New York Convention), signed in 1959. Arbitration decisions under the Convention are binding, streamlined, and applicable in the country-parties to that treaty. Let’s say you get a favorable arbitration decision in a US court. Any country signed to the New York Convention will enforce it through their courts. Most dispute resolution between international parties involves arbitration of this kind, which helps keep it local to you. 

But if you need to sue the buyer in their own country, that’s where things get complicated. Especially if they speak another language as you’ll need to hire an attorney in their country. You’ll have some jurisdiction issues to overcome too. Likely, it’ll be expensive, so if you’ve got a million dollars to throw at the case, great, but otherwise the challenge is in making legal action economically efficient. If you’re worried about disputes arising, walk away from the deal or speak to your M&A advisor.  

Who Can Help You Get Acquired Internationally?

As you’ve probably noticed by reading this far, we’ve helped hundreds of international transactions close. Our multilingual M&A team has managed acquisitions between India, Western Europe, US, Canada, and more. I recently helped a South Africa to US acquisition close. So first on your speedial for help with an international acquisition is us. We can cover 98 percent or more of situations.

If you’re really worried about complications or you’ve heard about something specific to where you or the buyer reside, engage local counsel. Don’t worry if you’re unsure where to start – we’ve got a full bench of legal, tax, and accountancy experts ready to help you. 

Likewise, you’ll find our built-in technology solutions to work for most geographic jurisdictions. Our escrow services are international. Buyers can verify their funds in any currency (though we convert it to USD on their profile). Our legal document builders also use country-agnostic wordings, which means they’re a sound foundational wording for most international transactions.

You’ll want to hire a CPA and possibly a tax attorney to advise you, but that’s true of any acquisition, not just international transactions. Whatever happens, consult with our international M&A team if you’re selling a business outside the US or to a buyer in another country. Not only will we help you overcome language, culture, and legal challenges, but we’ll help you get the best possible price and terms. 

The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.

Get content like this, and more, sent directly to your inbox twice a month.