US Acquisitions; Options for direct investments

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

1.2 Options for directly investing in the United States

Typically, French companies first sell goods or services in Western Europe. Often the initial entry is effected by using an independent sales agent or distributor.

Thereafter, the French company may decide to take direct control of its commercial activities in the United States. To do so, a direct investment is necessary. The following table is a non-exhaustive list of some of the traditional ways for effecting such direct investment.

U.S. Objective	Need American Subsidiary	Commercial Activities	American Partner
Directly control of the distribution goods and/or services of French company	Yes, an “Inc”*[see footnote]	To distribute in the U.S.A. goods and/or services of French company	None
Gain control existing traditional American independent distributor	An “Inc” may not be necessary	To distribute in the U.S.A. goods and/or services of French company	Purchase 51 to 100% common stock of the American distributor
Assume control of the business of such distributor	Yes, an “Inc”	To distribute in the U.S.A. goods and/or services of French company	Purchase of part or 100% of the assets of the Distributor (fond de commerce)
Purchase an American manufacturer with goods and/or services which complement the French company's product line	a 100% owned “Inc” may not be needed if a "stock acquisition" a 100% owned “Inc” needed if an "asset acquisition”)	To distribute in the U.S.A. goods and/or services of French company Manufacturer in the U.S.	- Stock acquisition of an American distributor, or - Asset acquisition
Joint Venture ("JV") with another European company to directly control distribute goods and/or services	Usually each JV partner creates a 100% owned “Inc” and the two “Inc’s” form a Limited Liability Company (“LLC”)	To distribute in the U.S.A. goods and/or services of European companies	- Stock acquisition, or - Asset acquisition, or

*Historically, most large scale business in the United States were conducted using a single corporate form of entity organized under the laws of one of the states of the United States. Typically, the name of the entity ended in "Incorporated" or "Corporation" or "Limited" or an abbreviation of the foregoing thereby showing third parties that the entity afforded limited liability protection to the owner/investors. This corporate entity is herein referred to as an "Inc".

Any of the above options involved major commercial, corporate governance, tax and accounting issues which must be understood before commencing any sustentative discussion with any American target of a direct investment or with one's potential joint venture partner. (See Section 3.1.)

DISCLAIMER

The information provided here and on the other pages linked hereto is intended for educational purposes only, and is not legal advice. Particular situations require particular analyses that can only be provided by legal professionals who specialize in the relevant fields and who know all the details of a situation. Also, a presentation such as this does not establish the attorney-client relationship that is necessary in any rendering of legal advice. Finally, one should be aware that the law is a chameleon-like beast that changes its colors frequently, and what holds good today may be reversed by tomorrow. The comments herein should then be read in that light.

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