A Foreign Affair with Minnesota Companies

Foreign buyers also prefer to purchase companies that are incorporated under Delaware law. Many U.S. companies incorporate in Delaware simply because its laws are the most commonly used; the rules don’t provide a big financial advantage but have been thoroughly tested.

Buyers from abroad often do intensive due diligence, particularly if no company officials are already in the United States and able to lead this process. “If they have those operations, they’ll rely on those people,” Stanchfield says. “If not, they’ll rely on outside advisors, sometimes lawyers and consultants they’ve never worked with before. That makes them a lot more cautious.”

U.S. sellers, then, “have to be even more diligent in packaging a company for sale,” Stanchfield says. Find professional advisors with overseas experience, and talk with them about when and how to discuss sensitive issues. Get records “in pristine order,” trace and verify intellectual property ownership, identify any environmental challenges, and be ready to explain any ongoing litigation. In many other countries, sellers prepare due diligence reports for buyers—just the opposite of the U.S. process. By volunteering more information, you put the buyer at ease.

Get Along Gang

Many foreign companies want an acquisition’s existing ownership and key managers to run the firm after it changes hands. “I can’t think of a time when it hasn’t been important for management and key employees to stay on,” Miller says.

For that reason, Sorensen says, “make sure you like the people, or that you can at least get along. Unless you have a clean-cut sale, where ownership changes and the seller goes to Florida, never to be heard from again, you need to be prepared to work together, perhaps for a year, perhaps for two or three or more.” That might not be easy, particularly if the buyer and seller have different ideas about how to run the company.

If a bidder has done other U.S. deals, ask to talk with references. “It is absolutely okay to ask,” Miller says. “I think you have to ask. If a foreign financial firm says no, I might question their motivation for refusing that request.” While you’re asking the hard questions, show the buyer some of your own courtesy and flexibility. “I’ve seen situations where a buyer has offered foreign language training to employees, or people have voluntarily learned the language through an outside class because they want to stay with the company,” Miller says. “It’s a great way to show folks that you’re part of the team.”

It’s a team that more Minnesotans will join as an increase in foreign purchases will likely continue through 2008. It seems the world’s businesses have taken notice of Minnesota’s good buys.