Acquiring a company abroad involves different considerations than an acquisition in the Netherlands. In addition to the usual financial, commercial, and legal aspects, you’ll have to deal with a different legal system, local tax rules, labor laws, permits, and possibly a different currency. Competition law and regulations governing foreign investments may also play a role.

Those who fail to adequately anticipate these factors run the risk of delays, unexpected costs, tax issues, or risks that only become apparent after the acquisition.

With proper preparation and the right guidance, these risks are well manageable. At FBM Corporate Finance, we assist Dutch entrepreneurs with international acquisitions through our international mergers and acquisitions network, Fusio Global Partners—from the initial choice of structure and valuation to due diligence, negotiations, and closing.

In this article, we discuss the key considerations when acquiring a company abroad.

Key Points at a Glance

The type of transaction is decisive: the choice between a stock acquisition, an asset acquisition, or a legal merger determines the risk allocation, tax implications, and complexity of the transaction.

Tax matters require a tailored approach: in the case of a foreign business acquisition, factors such as corporate income tax, dividend flows, withholding taxes, VAT, transfer taxes, and tax treaties all play a role.

Due diligence extends across borders: in addition to financial and commercial due diligence, you must have the company reviewed from a legal and tax perspective in accordance with the rules of the country in which it operates.

Currency risk can be a significant factor: in an acquisition outside the eurozone, exchange rates can affect the purchase price, financing, and future cash flows.

Employees have rights: in the event of a transfer of a business, employment contracts and terms of employment may be transferred to the buyer. In addition, obligations to provide information and advice may apply.

Regulators can influence the transaction: depending on its size, sector, and the countries involved, notifications or approvals may be required.

Acquiring a company abroad: Which transaction structure is right for the deal?

The first decision when acquiring a foreign company is the legal structure of the transaction. That choice significantly determines the complexity, risk allocation, and tax implications of the deal.

Share Acquisition vs. Asset Acquisition

In a stock acquisition, the buyer acquires the shares in the target company. The company continues to exist as a legal entity. As a result, the existing contracts, obligations, permits, and historical risks generally remain within the company.

In an asset acquisition, the buyer purchases specific assets and, in some cases, certain liabilities from the company. This offers more flexibility in determining which parts of the business are acquired, but often involves more legal and practical formalities.

When acquiring a company abroad, there is an additional dimension to consider. The target company is generally subject to the laws of the country where it is incorporated. As a result, it is necessary, for example, to examine how share transfers, contract assignments, permits, security interests, and liabilities are regulated locally.

The choice between shares and assets is therefore not merely a commercial or tax-related decision. It is a key component of the overall deal structure.

Cross-Border Merger or Legal Restructuring

In some situations, a cross-border merger, demerger, or other legal restructuring may be an alternative to a standard share or asset acquisition.

There are harmonized rules for this within the European Union. The EU Mobility Directive provides, under certain conditions, options for cross-border mergers, demergers, and conversions.

These types of transactions are legally much more complex than a standard share acquisition. Shareholders, creditors, and employees may have specific rights, and formal procedures must be followed in multiple countries.

Therefore, have a preliminary assessment conducted to determine which transaction structure best suits the acquisition from a legal, tax, and practical standpoint.

Legal Considerations for an Overseas Business Acquisition

When acquiring a company abroad, it is important to consider not only Dutch law but also the law of the country where the target company is located, as it may also be a determining factor.

Consider, for example:

• the company’s legal ownership structure;
• the powers of directors and shareholders;
• existing security interests and liens;
• contracts with customers and suppliers;
• permits and licenses;
• intellectual property;
• privacy and data processing;
• employee participation and labor law;
• industry-specific regulations;
• ongoing proceedings and claims.

In addition, competition law and rules governing foreign investment may be relevant.

Antitrust Review of an International Business Acquisition

A Dutch entrepreneur acquiring a foreign company may also be subject to competition oversight. This depends, among other things, on the revenue of the companies involved and the impact of the transaction on the Dutch or European market.

Turnover thresholds apply for notifications to the Netherlands Authority for Consumers and Markets (ACM). In the case of very large international transactions, the European Commission may have jurisdiction.

In the case of a foreign business acquisition, it is therefore necessary to determine, as early as the preparatory phase, which competition authority or authorities have jurisdiction and whether a notification or approval is required.

Investment Review and the Vifo Act

In addition, a security review may be relevant for certain transactions. The Dutch Act on Security Reviews of Investments, Mergers, and Acquisitions (Vifo Act) applies to certain investments, mergers, and acquisitions that may pose a risk to national security.

Among other things, the Act focuses on specific critical infrastructure providers and companies that possess sensitive technology.

For a Dutch buyer acquiring a foreign company, it is also important to verify whether the country in which the target company is located has its own investment review process or other reporting requirements. The rules vary by country.

What are the key tax considerations when acquiring a company abroad?

Taxation is one of the most important considerations in an international business acquisition. The final tax outcome is determined by the type of transaction, the buyer’s structure, the tax residency of the companies involved, and the countries involved in the transaction.

An acquisition that appears commercially attractive may yield a different return than initially expected due to tax implications.

Share Acquisition vs. Asset Acquisition

In a stock acquisition, the buyer acquires the shares in the target company. In an asset acquisition, individual business assets, operations, and, in some cases, liabilities are acquired.

This distinction can be significant from a tax perspective.

For a Dutch buyer, the following factors, among others, must be considered:

• the tax treatment of the purchase price;
• depreciation of acquired assets;
• any goodwill;
• local transfer taxes;
• VAT;
• deferred tax liabilities;
• tax losses;
• withholding taxes;
• the application of tax treaties;
• the Dutch tax treatment of foreign income.

In an asset acquisition, for example, certain assets may have a different tax basis, whereas in a stock acquisition, existing tax risks remain within the target company.

Dutch Participation Exemption

An important Dutch tax consideration when acquiring a foreign company is the participation exemption. Under certain conditions, income from a participation, such as dividends and capital gains, may be exempt from corporate income tax in the Netherlands.

Whether the participation exemption actually applies depends on the structure and circumstances of the specific investment. Therefore, the tax structure must be assessed before a definitive offer is made.

Dividend flows, interest, and withholding taxes

After acquiring a company abroad, cash flows may arise between the Netherlands and the foreign company. Examples include dividends, interest, management fees, and royalties.

Local withholding taxes may be deducted from these payments. Tax treaties and European regulations may, under certain conditions, provide for a lower rate or an exemption.

The method of financing the acquisition is also relevant in this context. Financing through a Dutch holding company, local financing, or a combination of the two can have different tax implications.

Therefore, be sure to calculate not only the acquisition itself but also the expected cash flows following the acquisition.

Transfer Pricing and Intercompany Transactions

After the acquisition, transactions often arise between the Dutch buyer and the foreign subsidiary.

Examples include:

• management fees;
• financing;
• interest;
• licenses;
• delivery of goods;
• support services.

Transfer pricing rules apply to these transactions. The prices and terms used must be arm’s-length.

Due Diligence When Acquiring a Company Abroad

Due diligence is already complex when acquiring a Dutch company. With a foreign acquisition, multiple layers of uncertainty are added to the mix.

You’re dealing with a different legal system, potentially different accounting rules, a different language, and a different business culture. Information disclosure and financial reporting may also be organized differently.

A structured approach with local expertise is therefore essential.

Legal and Tax Due Diligence

When acquiring a company abroad, due diligence must be conducted from the perspective of both the Dutch buyer and the country in which the target company operates.

Local advisors must, among other things, investigate:

• existing tax liabilities;
• ongoing tax proceedings;
• tax losses;
• contractual obligations;
• permits;
• labor law obligations;
• pension obligations;
• intellectual property;
• pending claims;
• environmental obligations;
• local regulations.

Dutch and foreign advisors must work closely together in this regard. It is precisely at the intersection of two legal systems that risks can arise that would be overlooked in a purely domestic due diligence process.

Financial and Commercial Due Diligence

Financial analysis also requires extra attention.

For example, the target company may report in accordance with local accounting rules, while the Dutch buyer assesses the figures differently. This can lead to discrepancies in EBITDA, provisions, inventory valuation, pension obligations, or other financial items.

In addition, the following must be examined:

• the quality of financial reporting;
• dependence on major customers;
• dependence on suppliers;
• intercompany transactions;
• local financing;
• pension obligations;
• labor costs;
• rent and real estate obligations;
• necessary investments.

Thorough due diligence, therefore, goes beyond simply verifying whether the seller’s financial figures are accurate. The key question is: What am I actually buying, and what obligations come with it?

What should you check before acquiring a foreign company?

No international transaction should be finalized without verifying at least the following points:

• Outstanding VAT and corporate income tax risks in the target country
• Tax losses and other tax entitlements
• Deferred tax liabilities
• Intellectual property and its registration
• Employment law obligations and ongoing labor disputes
• Pension obligations
• Key customer and supplier contracts
• Industry-specific permits
• Pending legal proceedings and claims
• Environmental obligations
• Intercompany transactions
• Financing and collateral
• Protection of trade secrets and data
• Contractual tax representations and warranties in the purchase agreement
• Any competition and investment reviews

Acquiring a Company Outside the Eurozone: How Do You Manage Currency Risk?

A Dutch entrepreneur acquiring a company in the United Kingdom, Switzerland, the United States, Poland, or another country outside the eurozone faces a risk that is usually absent in a Dutch acquisition: exchange rates.

How exchange rate fluctuations affect the acquisition price and cash flows

A change in the exchange rate can affect:

• the final purchase price;
• the financing costs;
• the value of the foreign company in euros;
• future dividends;
• intercompany loans;
• operating cash flows;
• the ultimate return on investment.

Currency risk must therefore be taken into account during negotiations and when structuring financing.

Practical Hedging Strategies

Commonly used instruments include forward currency contracts, currency options, and natural hedging through financing in the local currency.

Which strategy is appropriate depends, among other things, on the size of the transaction, the term, the currency, and the expected cash flows.

Therefore, even before closing, clearly assess how sensitive the return on the acquisition is to exchange rate fluctuations.

Employees and Employee Participation in a Foreign Acquisition

A foreign business acquisition affects more than just the buyer and seller. Employees, creditors, and minority shareholders may also have rights.

In this regard, a distinction must be made between Dutch rules and the rules of the country in which the target company is located.

Transfer of a Business and Employees

In the event of a transfer of a business, employment contracts are, in principle, transferred to the new employer under the applicable terms and conditions. The acquisition itself is not a valid reason to terminate employees’ employment.

In the case of a foreign acquisition, it is also necessary to examine how local labor law governs the transfer of a business. The specific protections and procedures may vary by country.

For a Dutch company acquiring a foreign business, this means that personnel costs, employment conditions, pension plans, collective bargaining agreements, and any severance obligations must be included in the due diligence process.

Employee Participation

Employee participation can also influence the timing of an acquisition.

In the Netherlands, a works council has, among other things, the right to be consulted on major financial, economic, and organizational decisions, including mergers and large investments.

In the case of an international acquisition, it is therefore important to determine early on which employee participation bodies must be involved and which procedures apply in each country.

Delaying this analysis until just before closing can lead to significant delays.

Protection of creditors and minority shareholders

In a standard share acquisition, creditors generally remain creditors of the same company. However, specific protective rules may apply in the case of legal mergers, demergers, or other restructurings.

Minority shareholders may also have certain rights, depending on the chosen form of the transaction and the laws of the country involved.

This is an important reason to determine, as early as the transaction structuring phase, which legal route is most appropriate.

Step-by-Step Guide to Acquiring a Company Abroad

An international acquisition proceeds in several phases. Asking the right questions from the start helps avoid costly surprises and keeps the timeline under better control.

1. Determine the basic principles of the acquisition

Identify the strategic and financial parameters of the acquisition in advance. Which company do you want to acquire, what is its value, and what financing is available?

2. Determine the transaction structure

Determine whether a stock acquisition, asset acquisition, or another type of transaction best suits the situation. Have the legal and tax implications of the various options assessed in advance.

3. Research the country and the company

Identify the relevant laws and regulations, tax rules, labor law aspects, and any required permits. Also verify whether competition rules or investment reviews apply.

4. Conduct due diligence

Have the company undergo a financial, commercial, legal, tax, and operational review. Engage local advisors as needed.

5. Determine the financing and currency policy

Determine how the acquisition will be financed and what implications the financing structure will have. For acquisitions outside the eurozone, currency risk must also be taken into account.

6. Negotiate the acquisition

Use the results of the due diligence in negotiations regarding price, warranties, indemnities, closing conditions, and any additional agreements.

7. Arrange the closing

At closing, the shares or assets are transferred and the purchase price is paid. In addition, all necessary filings, registrations, and approvals must have been completed.

8. Integrate the foreign company

After the acquisition, the integration process begins. This includes reporting, financial systems, IT, personnel, commercial processes, and collaboration between the Dutch and foreign organizations.

How long does it take to acquire a company abroad?

The timeline for an international business acquisition varies greatly from transaction to transaction. A relatively straightforward equity acquisition can be completed within a few months. For larger transactions, those involving multiple countries, or those with complex legal structures, the process can take six to twelve months or longer.

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The timeframes are approximate. The actual duration depends, among other things, on the size of the transaction, the countries involved, the complexity of the due diligence, financing, antitrust review, any investment reviews, and sector-specific permits.

Thorough preparation is not a luxury. It is one of the most effective ways to keep the timeline manageable, avoid unexpected costs, and increase the likelihood of a successful closing.

Frequently Asked Questions About Acquiring a Company Abroad

What should I look out for when acquiring a company abroad?

Pay attention to, among other things, the transaction structure, tax implications, legal risks, financial position, labor law, permits, competition rules, investment reviews, and any currency risks. Thorough due diligence and local legal and tax expertise are essential in this process.

What type of transaction is suitable for an overseas business acquisition?

That depends on the company, the country, the tax situation, and the risks you, as the buyer, are willing to assume. A stock acquisition is often simpler from a legal standpoint, while an asset acquisition may offer more opportunities to select specific activities or assets. The choice must be evaluated on a transaction-by-transaction basis.

What are the tax implications of acquiring a company abroad?

That depends, among other things, on the type of transaction, the country where the company is located, and the structure of the Dutch buyer. Topics include corporate income tax, participation exemption, withholding taxes, VAT, transfer tax, and tax treaties.

How does due diligence work in the context of a foreign business acquisition?

In addition to financial and commercial due diligence, the company must undergo legal and tax due diligence in accordance with the laws of the relevant country. Local advisors may be needed for this. The results are then factored into the valuation, negotiations, and purchase agreement.

Do I need to report a foreign business acquisition to the ACM?

That is not automatically the case. The reporting requirement depends, among other things, on the revenue of the companies involved and the transaction’s impact on competition. For large international transactions, the European Commission may also have jurisdiction.

Do I need a local advisor if I’m acquiring a company abroad?

When acquiring a foreign company, local expertise is often crucial. A local attorney or tax specialist is familiar with the laws and regulations of the country in question. A corporate finance advisor can coordinate the various advisors and workflows from the perspective of the Dutch buyer.

How long does an overseas acquisition take?

An international business acquisition can take a few months, but for larger or more complex transactions, you should expect it to take six to twelve months or longer. The timeline is determined, among other things, by due diligence, negotiations, financing, approvals, and the legal structure.

Considering acquiring a company abroad?

Acquiring a company abroad requires thorough preparation and a clear transaction structure. In addition to the usual considerations involved in a business acquisition, you must take into account the laws and regulations of the country in which the company operates.

The right structure, thorough due diligence, and effective coordination between Dutch and local advisors can help prevent many risks.

FBM Corporate Finance supports Dutch entrepreneurs in business acquisitions and international transactions. Through our international network, we can also engage the right local expertise for a business acquisition abroad.

Are you interested in acquiring a company abroad and want to prepare thoroughly for the transaction? If so, please contact FBM Corporate Finance to schedule an initial consultation to discuss your options.