Structure Research

*This post is is provided to us by Daryl Webb. Mr. Webb is an independent consultant with expertise in the hosting and cloud infrastructure markets and a specific focus and background in the Asia-pacific. Mr. Webb is based in Singapore and is formerly the CIO and CTO for Webvisions. He was also Chief Investment Officer for Caledonian Investments. You can visit his site at www.techquisitions.com or email him directly at: daryl.webb [at] techquisitions.com

Question: What are the challenges, risks and rewards of multi-country M&A in the Internet infrastructure space?

In many cases, the offices located in other markets are largely for local sales. There are some companies that replicate pretty much all of their infrastructure into each market, but this is rare and largely unnecessary

1. Location of the target HQ tends to determine the location of the deal.
2. Most target companies outside of the US will NOT want to use US law for the deal, even if they have a subsidiary/office in the US.

4. Directory liability (i.e., what can’t be contracted out of/insured against) varies by country for different facets of law – e.g., OSH, insolvency.
5. To sell into a local market, you typically need a local presence, with local relationships.

7. There are ownership restrictions in the Internet space in a number of Asian countries.

9. Acquisitions need government approval, and/or a new business licence upon acquisition which may be withheld or revoked after the deal closes.

(I could go on…)

The economics of doing business in many Asian countries is very different to the US and Europe. The margins on a typical hosting business in Vietnam, for example, would not support the salary of an expat relocated there to oversee the office.

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