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Insight

23.05.24

Fast track to global: internationalisation through acquisition

By Tom Wilding, Investment Manager

Expanding across borders is a critical strategy for businesses aiming to enhance their growth and market presence. At Sovereign, we’ve supported many companies with their global expansion plans, deploying strategies which blend organic growth with strategic acquisitions. What we’ve learnt is that for European companies eyeing markets like the UK, the US and the Far East, internationalisation through acquisition is a game-changer.

Speed to market

One of the primary benefits of internationalisation through acquisition is the rapid market entry it allows. By acquiring established entities, businesses can bypass the slow, traditional methods of entering new markets, such as setting up new operations from the ground up, which can be both time-consuming and capital-intensive. One example is our software development business Zenitech, which expanded into Hungary when it acquired Autsoft in 2022. This drastically shortened the time it took to achieve an operational presence in a new region, bringing onboard 150 talented software developers overnight and allowing immediate engagement with new clients and quicker integration of local market strategies.

Local expertise

Acquiring companies that already operate in the target market provides invaluable local expertise. Local firms bring a deep understanding of cultural nuances, regulatory compliance, and market dynamics that are crucial for successful expansion and operation. Take Cordium, the hedge fund compliance and regulatory consultancy which expanded its footprint into the US and Far East through eight acquisitions during our investment period. By acquiring local companies, Cordium gained immediate access to established networks, local talent, and – importantly - regulatory know-how, which would have taken years to develop independently.

Enhanced capabilities

Through strategic acquisitions, companies can significantly enhance their existing capabilities. This can include diversifying service offerings, integrating advanced technologies, and scaling operations more effectively. When Acolin, our tech-enabled provider of regulatory and cross-border fund distribution services, bought Fundbase in 2021, not only was Acolin's client reach extended but its technology platform was also enriched, making it a more comprehensive service provider in the regulatory and compliance sector.

Summit Group is another good example. Summit - formerly Aquitaine Group – is our fiduciary and administrative services business, and since we invested in 2020, we have followed a strategy of acquiring firms to broaden the Group’s service scope and regional strength. Summit acquired firms in strategic locations: Summit Trust International in Switzerland, Garfield-Bennett in Jersey, and Sanctuary in the UAE. These additions not only expanded Summit's operational geography but also diversified its trust and corporate services across several key financial centres, boosting its market position and service depth.

Increased competitiveness

Finally, establishing a local presence through acquisitions can dramatically increase a company’s competitiveness. It enables businesses to serve local customers more effectively and respond more rapidly to market changes. This local foothold can be leveraged to outperform competitors who may not have the same level of local integration or understanding. By following this strategy, companies like Cordium have been able to offer tailored services that meet the specific needs of local markets in the US and Far East, significantly enhancing customer satisfaction and loyalty.

Internationalisation through acquisition offers a strategic advantage by providing immediate market access, local expertise, enhanced capabilities, and increased competitiveness. At Sovereign, we guide European businesses through this complex yet rewarding process. Whether it’s expanding into the bustling markets of the Far East or establishing a presence in the financial hubs of the US and UK, our support helps businesses acquire the right local partners to unlock growth opportunities on the global stage. If you would like to find out more about how we help business internationalise, please feel free to contact me here.