US Acquisitions; Pre-negotiation Phase

Cette page en français This page in French

Author: Jonathon Wise Polier
Member of the Bars of New York State and Paris (France)
4 rue de Marignan, 75008 Paris

Telephone: (33) 1 47 23 41 51 / Fax:  (33) 1 47 23 37 93
E-Mail: j-polier@paris-law.com / http://www.paris-law.com

(List of articles in English and French relating to various legal issues)

1.1 US Acquisitions: The Importance of legal and accounting advisors in the pre-negotiation phase

Typically, French companies first sell goods or services in Western Europe. Thereafter, they may decide to enter the United States market. Often the initial entry is effected by using an independent sales agent or distributor. Subsequently, for strategic and economic motives, the French company's management decides to make a direct investment in the American market and to better master the company's destiny in the North American market.

As detailed in Section 1.2, implementation of such direct investment decision often involves purchasing all or part of an existing business in the United States (hereinafter sometimes referred to as the American "target" business or company).

Caveat emptor: Certain traditions die hard in Europe. Presidents of European companies too frequently conduct "preliminary negotiations" with the president of the American target and only thereafter to call-in an experienced American Certified Public Accounting ("CPA") firm and legal counsel once a preliminary meeting of the minds has been achieved.

The President of the American target will not make the same mistake. From the very start of the preliminary discussions, the American target's President will have such a professional support structure in place, even if he does not mentioned it. In addition, American target's negotiator will have the important "home court advantage", he will know the secret details of American target's business, including important facts not reflected in the American target's financial statements.

For a European to effectively conduct pre-negotiation, it is imperative that President or Managing Director of the European company be counsel by both an American-trained attorney and accountant so he/she has the necessary understanding of  relevant legal, tax and accounting issues. 

 There are a number of ways ("options") to effect a make a direct investment and each option naturally involves legal, corporate governance, tax and accounting implications. Some of the direct investment "options" are discussed in Section 1.2 and the other issues are addressed throughout this multi-page analysis.