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Hi, Armander Roman with Axiom Founders family office. I’m with John Far from Columbia West Capital. John, how are you >> doing? All right. How are you? >> Good. Good. John, thank you for this time that we’re having right now. What what uh we’ll talk about as we discussed earlier is when someone goes through that sale for the first time with the business, they’ve not done this before. They might get some offers from foreign buyers, maybe from Europe or from Asia or just just foreign buyers. They’re
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already going to be a little bit maybe nervous, appre apprehensive, stressed about going through this once in a-lifetime sale. And if we can talk about that foreign buyer specifically, you know, should they be concerned about a foreign buyer? Should they be excited about a foreign buyer? Is it really just the same as anybody else from any other state? Um, but let’s just touch on that for that seller who’s not gone through a sale before, ever, and now he’s got an investment banker engaged. He’s got a a
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couple of potential buyers that are foreign. He just doesn’t know what to make of it. >> Yeah. No, that sounds great. Uh and I’ll I’ll say for the viewer uh this video came about through a discussion that you and I were having on a particular scenario uh that one of your clients was experiencing and and given the content was relevant to a lot of others that that you and I talked to. Uh you suggested we post about it which is great. You’re always um great with sharing information with the community
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and and quick to think about that. Um I think it’s it’s great and I know it certainly served you but um I’ll >> thank you >> start maybe Armano by saying this is I’ll characterize this discussion as what I’ve seen. >> Okay. >> Um I I don’t want to suggest we’re experts and and only focus on crossborder transactions. Right. >> Uh it is fair to say though with most of our buyer list we are putting foreign nationals on those uh given they tend to
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be good buyers right u often especially if our client is of strategic fit uh often foreign companies seeking to gain a foothold in the US are excited to buy here. So, uh, I’ll speak from that experience and, uh, and you’re welcome to, >> and John, >> and I will ask you, John, if you, you know, I I mentioned you’re of course with Columbia West, that’s your company. >> You’re an investment banker. Just just in a very broad picture, describe what you do as an investment banker for that
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seller of a business place. >> Sure. Uh, we’re most commonly working as an agent helping a business owner sell their company. uh we will do capital raising debt and equity capital raising but the vast majority of what we’re doing is helping people sell. So it’s it’s very uh typical uh to work with a smaller middle market business who is selling to a foreign national and uh perhaps
to back up prior to CWC. I uh grew up at Deutschbank and and moved out here through Honeywell Aerospace. Uh
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both of which were global organizations and so spent a lot of time uh with cross uh crossber transactions uh both on the M&A uh you know equity and debt capital market side as well. So um comfortable with these broader discussions. I’ll also say the answer is sometimes nuanced. Uh sometimes the differences are nuanced. Uh and certainly it depends on the buyer. Um, I’ll I’ll try to make some generalities hopefully without uh offending any of the deal guys from those regions and uh I’ll talk about
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whatever’s on your mind. >> Yeah. Well, well, you know, your your your your client here is say that company in Arizona or Iowa or any place else in the US going through that first time sale. They see a buyer who’s maybe from Europe or from Asia. They just don’t know what it means. So, as you as you talk with that owner about these prospective buyers, they might ask you about, you know, are negotiations different with someone outside the US? You know, are there cultural differences
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how they negotiate on their expectations? Um, you know, what what might they experience or expect as they think about a non US buyer of their business? >> Sure. Sure. Um, I mean I can make some generalizations and maybe not to rant for too long. Feel free to >> to interrupt, but uh I’d say what we’ve seen a lot of are um over the last several years are Asian buyers and particularly um Chinese buyers. Uh we have seen um they’re they tend to be culturally a lot more open to back and
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forth. uh as opposed to the United States where where two parties might resolve something uh and both sides would be held to that decision even if the deal closing wasn’t for another 15 days or what have you >> um with with Chinese negotiating style uh you see it a lot more iterative uh there’s a lot more back and forth even if they covered it before so they almost negotiate right up to the line >> and and revisit items that you’ve already covered >> okay >> um I think with all cultures but
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certainly um Asian cultures um respect and and the the notion of of face saving is is very important. Um the notion of relationship is also very important. Um so th that’s attractive. Um what I would also say is that uh if you hit on those factors and and you come to terms valuation tends to be less critical. uh which I I’ll selfishly say means uh we’re often able to get better pricing uh on the valuations for our clients uh that we tend to be selling. So um Asian buyers grossly overgeneralize. Okay. Um
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uh may be willing to pay more um not always of course but that that’s important. And then um you know just as an anecdotal thing uh the relationship always ultimately begins with a long dinner. I’ I’ve noticed uh you have that uh certainly with Chinese buyers where um they want to spend a lot of time with you. Uh jokes aside, they like to drink to build a relationship. Uh if you’re in China, you’re going to be um drinking this stuff called uh Baiu or this other strange thing that’s that’s very
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ginlike. It’s very pungent, but you can smell that evergreen thing. It’s awful. But uh we sit there and smile and and and and build relationship and and that that goes a long way uh from relationship building. Uh noticed that that’s very important in China, very important in Japan uh to have that quality time with the buyer. >> Um I I’ll just keep going perhaps, but the >> the the cultural distinction with Japan very specifically is uh time. They are very slow uh extraordinarily slow and and what I
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and well let me step back I for the record I’ve only really dealt with Japanese conglomerates >> conglomerates are very slow anyway right but um you know I’ve not really dealt with entrepreneurial firms in Japan but but what I’ve noticed is that um they both require ultimately um approval from the top but they also build consensus so I think what you have is this thing where you’re you’re having these delicate decisions um that are moving very slowly both uh up the uh the
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ladder and then back down um until it’s ultimately communicated uh to me the banker. So, so, so even though John, excuse me, even though there may be a decision maker, there still is a consensus building happening within their company before the decision maker makes the official decision to say yes. >> That is correct. And it it often seems to go all the way to the top for those largest deals >> uh that we’ve dealt with. Uh again, I’m making a lot of generalizations, but
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Yeah. Yeah. Yeah. Um in terms of documentation, they tend to be very cautious with risk. Uh and I would also say about um Japanese related um things that I’ve seen um if the relationship is strong and the documentation is there and the transaction is as everyone wants and their strategic value they also tend to be willing to pay more uh to have those considerations. So uh that’s that’s also important to note. So I I think what I’m saying is is while there might be cultural differences that
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one has to wade through during the sale process, sometimes having foreign national buyers on your list is attractive to the extent you’re opening your opportunities to, you know, raise valuation in an auction process. Uh I think it’s always the case that more eyeballs equals uh greater chance for valuation, but um that’s certainly true when you’re adding some of those foreign
nationals to >> Okay. >> Oh, um another thing I might mention, I I structurally uh I’ve seen Japanese
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firms be more willing to do partial acquisitions. Uh here in the US, when you get over 20%, it’s it’s a pain for uh US especially publicly traded buyers because you have to consolidate earnings. So there’s a an administrative burden and financial reporting burden in doing so. So the notion is once you’re over 20% they almost always invariably demand 100% in the US. Um they don’t suffer from that in Japan. I’ve seen multiple acquisitions where they took down uh 60% 80% of uh of a company and
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and ultimately uh bought the rest of it or or or chose to not buy the rest of it. Um I think Sunstate was one of those. Uh who was that? Sum Sumatono. uh Sun State sold 80% of its business to Sumitomo and then just in the last year or two sold the remaining bit that uh you have uh that that partial acquisition that’s that’s fairly unusual among large publicly traded businesses in the US. >> Okay. Well, that’s interesting. So, you know, one thing one thing I’ve heard you say many times is, you know, what is the
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buyer really trying to achieve in this in this in this transition, in this exit? And so maybe if their goal is to sell most of it and retain a smaller portion, this might be an an avenue to get there. Correct. Um large companies in the US have venture capital arms. So um for them to take a smaller stake in a company is is not unusual, but it’s rare to see a majority deal that still leaves upside in the form of stock. uh where it it’s un it’s uncertain as to when that would be exited. Um you see earnout
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certainly um or you see people that roll roll stock but not uh but but they they tend to take equity in the buyer. Um but what’s what’s unusual is that a a seller would retain some of their own stock when sold to a private company. That just almost never happens in the US. >> H yeah it’s interesting. That’s interesting. So you mentioned some of the cultural issues, you know, a longer dinner or a longer relationship building upfront versus maybe what we’re we’re used to here. That might be part of what
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might might happen. Um, what about you you touched on regulatory issues too with um and I I I think about a a sale I know of recently that took place where the buyer was from I believe they were from Taiwan and it was a surprise at the at the latter part of the business sale that there was some kind of an approval required that the US federal government had to had to give it their blessing basically. And I remember thinking to myself at that time, John, well, I hope that um at that time there was a big
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cut, a lot of big cuts being being done at the federal level. And my immediate thought was I hope the people who are making those decisions in our federal government still have jobs. Otherwise, this sale, I don’t know what’s going to happen with it. Luckily, fortunately, the people did still have those position positions and the sale did go forward, but to them it was it was a surprise at the latter part of that. And I imagine depending on the industry that you know that might be there like with FDA or
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something like that that >> well actually this that’s one I was thinking of the FDA has made a lot of cuts and uh I I’ve seen a a food business recently be affected by uh the fact that they were uh expecting feedback from employees that were no longer in that department. Uh so it’s that that you know government cuts aside you’re asking about regulatory authority. Um well I’ll frame it by talking about the US right we we deal with national security antitrust and securities law um most of them all
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have some uh relatively comparable uh business so you know here in the US it goes through what’s called uh CPHAS CPHAS um it’s a basically committee on foreign investment that assesses really from a national security perspective um what’s okay and what’s not. But it’s it’s true that they also have uh that authority. The um uh the PRC has uh an organization that does that uh and that also China is what I’m talking about that the Chinese government um has uh certain tests uh that are required to go
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through uh for companies that are associated with both trading and antitrust and and national security. Um the UK certainly has that and the EU has that. Um as it relates to antitrust, um EU the EU commission’s uh known to be more stringent and tougher on acquisitions than uh than our U FTC has been historically. Um and that maybe the most famous example of that was the the Honeywell GE merger uh which ultimately didn’t happen but which was approved in the US and those companies went as far
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as to begin uh selecting you know who was going to run uh certain departments and uh who would be heading divisions and who was going to be laid off only to realize u not quite a year later that the European Commission did not approve that acquisition. that unraveled. Um but you you again each of these countries is going to assess on those three categories uh the uh >> the antiust securities and uh national security as well. >> Sorry. >> Yeah. You said national security, antirust and securities typically come
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into play for at least within the US, right? >> Correct. >> Yeah. >> Correct. And um and if a foreign national is buying in the US uh certainly CPHAS is going to be uh involved and um and you’ll also have to check the ITAR box. I mean that that is basically more specifically um related to countries that are involved in in um terrorist activity or or selling arms to terrorists. uh
someone that we’ve determined is um not a viable trading partner legally. So you cannot uh sell to one of those
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countries. Uh but beyond that um CPHAS is more actively involved in assessing technologies which are um at risk or u at risk of being sold um based on some other relationship with that buyer uh to someone we don’t like or or have fears. Let me say it more politically. Someone we may have fears uh >> Yeah. >> Uh could misuse that. >> Yeah. And and that would be really determined by by our US federal government who they’ve determined is like they the travel warnings, right? US
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citizens are not advised to go to X country because of something. >> That’s correct. Uh but you’ll see that the the buyers uh country also has u certain regulations that they have to approve but it’s usually dictated by size like I know the UK is like 100 million pounds is a a crossing point uh where they have to uh assess uh national security and and some other things that that are very important to them. uh anti any trust there is um done it’s called the CMA what’s that stand for it’s like a
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competitive markets assessment or authority or something but they >> they basically uh serve that role of the the the DOJ in looking to see if uh an acquisition is going to be anti-competitive >> uh they also have uh certain protections around employees uh called the uh the transfer of undertakings that that basically is designed to protect employee jobs. So when you acquire uh a business, it is understood that all of the employees are to come over to new co under the same salary and u you know other
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arrangements, benefits and so on. uh it’s automatically expected, you know, here in the US when a buyer buys a company, they often very specifically try to structure it, say that they’re allowed to cherrypick employees. Um so that’s not the case with the UK. So you see that a lot in France, as you can imagine, um in other European countries, uh they are more employee friendly. >> Yeah. >> Uh the US is more creditor friendly and and and company friendly. they seem to um you know.
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>> Yes. So an owner it sounds like >> Yeah. Thank you, John. So it sounds like an owner who who really uh wants to when he when he or she steps away from their business and they want all the employees to have their jobs and and and and know that that that’s part of what you might get with say a French buyer or maybe a buyer in the UK. >> Yes, for sure. where it’s actually mandated as part of the uh part of just their their government system. It sounds like >> for sure and in in bankruptcy it’s even
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more extreme. I I’ve seen a transaction in France where the uh the company was actually given to a buyer for one French frank but with the understanding that they had a plan that retained all employees and uh and frankly it was a business that was overstaffed and uh was losing money. that uh they they sought to retain those employees uh more so than they sought to ensure the >> continued sustainment of that business as as it was. So it was restructured but but with employees in mind. >> Wow. Interesting. Interesting how the
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different countries have their own their own their own views and their own not thoughts but their own regulations that can certainly impact. So the the seller here who’s not gone through sale before, a lot of this might be very very new, of course, because they just don’t they just don’t know. >> Yes. But um into your question, it’s a it’s a client-entric question. What does your client, which I presume is a US seller care? Um, I I’d say it’s the job of the transaction attorney and and the
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investment banker to wait through those those regulations and make sure that everything has been provided to those buyers, but uh I’ll I’ll say not to be cavalier, your your client doesn’t care if they’re getting better valuation terms and conditions. And um from our perspective, it might be a much uh more superior buyer uh in the event that you’re able to get better valuation. If if that foreign national has great strategic value in getting a US footprint, perhaps they’ll pay your
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client for that. >> But but these nuances you also have to be conscious of and and have agents who are you paying attention to them uh to make sure that there are no missteps or surprises. Yeah, interesting. Interesting. Just just hearing what you’re saying. And I think you’d mentioned before foreign currency, you know, a foreign buyer makes me think about foreign currency. Does that really come into play? Does it have any bearing on the sale to a foreign buyer? >> I think you can structure around it is
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how I would say it. Um, yes, they they may very well want to pay for you in euros, uh, Hong Kong dollars, whatever the case may be, but you can fairly easily do an FX swap to reduce that risk if your client is worried about it. Um, if commonly a transaction is dollar denominated. >> Okay. >> Okay. So, it doesn’t come up as frequently as you might think. and and and you know banks are designed for this. When you you over there uh transfer your Hong Kong dollars, they get switched to US dollars upon
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conversion that day. Um if for some reason you are paid in a foreign currency, there are plenty of investment banks with capital markets desks who are happy to structure for you a um an FX swap. So you can swap euros to dollars for a small amount and um and it you know may affect the purchase price by a fraction of a percent. >> Okay. >> But it can convert that to dollars in the
in the event that it’s necessary. >> Okay. So really not an issue then it’s it’s an >> No, I don’t think so.
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>> Okay. >> I I don’t think so. and um you know they’re they’re fluctuating and we’re fluctuating you know unless you’re um you know selling to an Argentinian company or uh you know another some third world country that that that has extreme volatility I I I wouldn’t worry about it too much. >> Okay. It sounds like then John what you’re saying is the the the the the uh owner of the business, the founder who is now selling for the first time when they come on board with you and you’re
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helping them to go through this process and all of a sudden they see two or three foreign potential buyers in that mix, they really shouldn’t be afraid of it. It might get their attention, of course. They shouldn’t be afraid of it, but they should maybe understand some of these, as you mentioned, some of these cultural nuances or maybe nuances that happen within their own country, the buyer’s own country, but shouldn’t be necessarily afraid of that. Just understanding it might be a little bit
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different. >> Exactly. It may be different. There may be a cost as it relates to a little bit of time. uh there may be some administrative costs associated with waiting through some of that providing more material to that buyer because they have to get approval. Uh but that’s okay if you’re at that IOI stage at least where you know uh that it’s worth it. I mean what I suggest is you um you run the transaction as we normally might in the US which is to say that we create that offering memo. uh we answer some
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questions, but we don’t get into what I’ll call thorough due diligence until later. You you accept that uh list of of IIS that say you you go out to 200 people and you get 10 IOIs. You assess those and determine that there are three companies on that list that you’re going to spend a lot of time with going forward and answering their questions. So, uh, ideally the way we run a transaction here is designed to save time and, uh, you you wouldn’t want to do all of that for for 10 or 20 or 30
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companies, >> right? >> Uh, you try to limit your, uh, your amount of time spent. But I will say out of the other side of my mouth, um, the Japanese, for instance, very frequently want to do more due diligence upfront. they they really want that uh letter of intent indication of register letter of intent to stick and they don’t like uh they don’t like changing that. So what you commonly see is there out of you fear of making a mistake they they ask a lot of questions upfront and and that
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does create a a tough decision uh really for you you and your banker you the seller and your banker to say how much time are we going to spend with this person? Uh is there a chance that we can flush out an approximate valuation range before we go go down that road of answering questions? um you can do that but uh commonly that’s hard to get. So I have been in that situation before. >> Okay. Okay. Well, this is quite helpful. Just an abrupt one more question for you, John. The you know as investment
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banker of course you’re helping that that owner go through this sale and many have never gone through a sale before. They don’t know what they don’t know and you’re educating them and and of course doing your your your thing for them to help them have a successful exit. the um this is September of 2025. The way the environment is today, the you know the buy sell environment. Do you see is there any thing that tells you that maybe as a seller is thinking about selling that now maybe there might
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be more foreign potential buyers who are interested in their company or maybe in prior years maybe not so much that would happen but maybe now it is more likely. Well, it’s um it’s a whole bunny trail that we can talk about. I’m sorry, my thrine. A whole bunny trail we may not want to talk about, but I will say that I have heard of foreign companies consider more acquisitions here given the current tariff environment. >> Yeah. >> Um I actually don’t think that is a solution. uh the company of record, the
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importer is the one that um you know has to pay those tariffs and I actually don’t believe that the owner of that business if there’s a change of control. I don’t think that will obiate the requirement to pay tariffs. So uh I think if you buy a US business as say a Chinese or a German company, I don’t think you can get get around those tariffs. I I do think that some people believe that you can. >> So, uh I’m answering your question very directly. Is there a reason why some
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people are considering it more? I have heard that they are, but I’m not sure it’s the best reason. >> Uh I would say that the globe has been choppy generally postco and some people may run to the US as a perception of stability. >> This is a stable economy. I I’ll knock on wood and say that it always will be on a relative basis, >> right? >> But I don’t think that’s new, right? Armando, you ask what’s what’s new come lately. >> Um I I think this is always a a spending
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market. This is from a capital markets perspective, the largest market. So there are a lot of uh European and Asian companies who want to have a presence here to raise capital here with the perception that it is less expensive to raise capital here. uh this is the largest debt capital markets market on the globe. Uh so it’s cheaper to raise debt capital here um and and easier in terms of the number of organizations who can process that. So um the world mostly still today does business in dollars. Uh
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so doing dollar denominated capital raising uh is easier. So um and and then from a a market perspective there are uh there are buyers here of products uh and so it makes sense for companies to have a presence. We are a consumer-driven society, right? We we spend money on stuff. >> I think that’s going to continue. >> Right. Well, John, just touching quickly on a couple things. You mentioned some cultural issues, maybe regulatory issues. Um, you mentioned, you know, here in the US, national security,
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antirust and securities are things that we have to be aware of here in the US. Um, and that, you know, a foreign a foreign a prospective foreign buyer shouldn’t make the the seller run for the hills and be afraid. Instead, they should maybe take a look at it and and understand that it can be a very viable buyer for them. Culturally, some of the the processes might be a little bit different, a little more time up front, as you said, depending on on the buyer’s culture and where they’re from. Um, but
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it certainly seems like it has been and can still be a very uh successful exit for that seller if it meets what the seller is trying to accomplish. And you’ve told me before that when you meet with a seller who is thinking about going through that sale for the first time, you want to make sure you understand what they’re trying to get to so you can help be their guide along the way and help them achieve that outcome as much as possible. >> Correct. And are you expected to roll equity? Uh are you getting 100% of the
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proceeds at close? Uh which greatly derisks any transaction? >> Uh or are you expected to roll, in which case you may want to spend more time assessing some of these issues and cultural distinctions and and looking for risk and paying attention to that. But um I I’m less concerned about it. And I I think you know pretty quickly if there are opportunities, right? you you look at that indication of interest to to assess is is that incremental amount of administration and effort worthwhile
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or not. Uh you should know um 3 months from any kickoff of a process uh whether or not it’s worth it. >> Fantastic, John. Thank you so much. We touched on a wide area here within that, but I think that’s extremely helpful. I know that as I’ve been talking with with uh prospective sellers, um the foreign buyer has been coming up in conversation and you know what will that look like? I guess we’ll see. As you said, well, you know, we’re still uh regarded relatively as a very stable market here in the US
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and presumably that will continue. We we all hope that anyway, >> right? >> So, uh good John. Again, thank you for this conversation. I really do appreciate it. >> Great to see you. >> Yep. You too. Thank you. >> Okay. Have a good weekend. >> You too.
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