Ask Axial: Is It Time to Expand Internationally?

Welcome back to “Ask Axial,” where we ask investors and advisors Axial questions submitted by middle market CEOs.

This week, we’re looking at what economic turbulence overseas can mean for private companies thinking about growing abroad. Here’s the question:

In light of recent events in the Eurozone, China, and elsewhere, is now a good time to be expanding internationally?

Kyran Culhane, DCDB Group

At DCDB, we encourage our clients to invest in companies, not countries. Higher interest rates in the United States will make credit tighter in emerging markets, and that increased cost combined with uncertainty and risk due to recent events in the Eurozone and China will change the playing field faced by firms expanding internationally. Nevertheless, emerging markets in Asia and Latin America still have the upper hand in the ability to generate greater returns for investors who take the time to do proper due diligence.

Sheri Orlowitz, Artemis Holdings

The US market is frothy and multiples for good companies have hit untenable levels, at least for us at Artemis.  So, if acquiring new technology, growth or diversification by acquisition is your game, go North to Canada, South to Columbia, or Brazil, or look at some of the interesting companies available in Portugal, Spain and Greece.  Greece will survive and they have interesting food companies (of course, the best olive oil in the world), are warm and friendly and comparatively speaking, with company risk priced in, the multiples make sense.

We at Artemis have formed solid relationships and have exclusive in-country partners with whom we work in Greece, Portugal and the Province of Ontario in Canada.  We have strong relationships with food distribution companies in Columbia and aviation and wine in Argentina.

Graham Conran, TAG Asia Partners

There is never a perfect time to take risk. Now is as good a time as any – so focus on identifying and minimizing as many of the risks as you can and go. Respond to the ones you missed / never saw coming quickly (un-like wine – they never get better with time). It has never been easier to expand overseas – physically or virtually. But that does not mean it will be easy to do. There is still a lot of hard stuff to get done and you won’t get it done perfectly the first time.

It has also never been more important to expand overseas – your competition is no longer limited to the firm in the next state or on the other coast. “Made In America” means something to billions of non US consumers and businesses – we see it every day. You are leaving a lot of personal, professional and top line growth on the table – get out there. If your business requires a physical presence – take time to find the right partner and the right deal. Avoid the temptation to go it alone. Joint ventures that are well structured with the right partner will significantly improve your chance of success, help you and your management team learn how to navigate a new market and avoid costly missteps.

Marshall Rocke, SecureBridge Business Opportunities

Despite the recent events in Greece, China and elsewhere, this is still an excellent time to invest and expand globally.  Short-term disruptions should never interfere with long-term planning.  The global middle-class continues to grow much more quickly in Asia and Latin America compared to the U.S. and Europe.  Companies that want access to these markets should not be afraid of temporary market disruptions and should absolutely explore acquiring high-quality foreign companies that can provide local experience and know-how.