New markets:

broadening the geographic footprint via M&A

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Session recap

Step wisely: lessons on crossing borders

Buying a company in another country to expand your global footprint may seem like a good way to accelerate growth. But companies need to exercise caution before crossing borders, warned the panelists at the “New markets: broadening the geographic footprint via M&A” session on Wednesday.

Moderated by Steve Krouskos, Global and Americas Markets Leader, Transaction Advisory Services, Ernst & Young, the panel featured Jeff Sprecher, Chairman and Chief Executive Officer, IntercontinentalExchange (ICE); Charles Sweat, Chief Executive Officer, Earthbound Farm; Adena Friedman, Managing Director and Chief Financial Officer, The Carlyle Group; and Chris Kleiman, Vice President Corporate Development, Dell Inc.

Panelists specifically warned against entering a country simply because a company felt they needed to have a presence. Sprecher said his company bought an agricultural commodities exchange in India, but when the price of wheat plummeted, the Indian government banned wheat trading and then issued another ruling that no foreign company could own more than a 5% share in a commodities exchange.

Needless to say, he added, “we ended up writing off that investment” and learned a valuable lesson. “Now we won’t even start a conversation with another company unless we can see that we’ll own the whole company.”

The panelists also warned against giving up too much control over technology or intellectual property (IP). “Never underestimate the value of your IP, and don’t compromise to get a deal done,” Friedman advised. She and the other panelists agreed that ensuring that the integration is successful is even more important than finding the right deal. “Cultural differences cannot be underestimated. Integration is a forever activity,” she said. Kleiman echoed her point. “The transaction is easy, integration is the hard part. Dell won’t go forward with an acquisition unless we have a fully vetted integration plan.”

Sweat said that you also have to be aware of “micro-cultures” within the country and ensure that the company you partner with shares your values. “We’ve stepped away from companies that didn’t have values that meshed with ours, such as on child labor or education. You need to have that map that you don’t veer off. Know your values and stay true to them.”

Speakers:

Jeff Sprecher photo

Jeff Sprecher
Chairman and Chief Executive Officer
IntercontinentalExchange (ICE)

Charles Sweat photo

Charles Sweat
Chief Executive Officer
Earthbound Farm

Adena Friedman photo

Adena Friedman
Managing Director and Chief Financial Officer
The Carlyle Group

Chris Kleiman photo

Chris Kleiman
Vice President Corporate Development
Dell Inc.

Moderator:

Steve Krouskos photo

Steve Krouskos
Global and Americas Markets Leader, Transaction Advisory Services
Ernst & Young LLP