While international expansion represents an enormous opportunity for businesses to accelerate their growth, launching into new markets can be daunting. Many of the 150 investments we have backed have gone global, and we’ve found that accepting the challenges of internationalising your business – and confronting them – can truly fast-track your growth ambitions.
This is why we launched Livingbridge’s internationalisation team, based in our offices across the UK, the US and Australia. The team works with our investee companies, equipping and empowering them to deliver their global growth plans.
The key to global growth is good preparation. Too often, very successful businesses come unstuck when they run into challenges they hadn’t planned for or anticipated. Our view, having been on this journey with our investees many times, is that putting in the groundwork at the start will lead to a much more efficient process of market entry. It is important for leadership teams to think through:
- The business case for international expansion. What is your business’s rationale for expanding into a particular market and why is it attractive? For example, do you have existing clients in those markets or are you receiving inquiries from clients based there? Are your competitors already active in the new market?
- Potential red flags that might give you pause for thought. For example, does your management have the capacity and the skills to pursue international expansion at the current time – do you have someone in mind to lead the initiative? Is your core business stable enough for you to feel comfortable pursuing ambitious new goals. Does it have the resources, including the financial stability, to go ahead?
- The market intelligence required. What do you know about your chosen market and how much detail do you have? What are the characteristics of the market, where are the customers and who will you have to compete with? What about factors such as regulation? There is no substitute for on-the-ground research here – meeting potential customers, investigating the competition and assessing product market fit. All of this will help you build the data necessary to validate your hypothesis for entering the market.
- The details of the market entry plan. This sets out your execution strategy in detail. What will be your value proposition and how will you target customers? What does your operational model look like? Having the right talent is a crucial part of this plan. Ideally, you will have someone from your UK business who understands your business well but is capable of establishing it in your new market, building a bridge between the two and helping build out your local team
It is easy to undercook these preparations when managing international expansion alongside running your business. We believe our perspective, from having been through this experience before, enables management teams to face these challenges and build conviction to achieve their goals.
Livingbridge’s international offices in Melbourne and Boston enable us to support investee operations across the globe. With boots on the ground we have the network, market knowledge and resource to support international expansion from strategy to execution. We help leadership teams to gather the crucial market intelligence to build the business case and then put it into practice, including helping them to hire overseas talent, source and execute M&A opportunities and provide them access to our network of advisors and sector specialists.
International expansion in practice
International expansion looks different for each company, and the right approach will depend on your business’s unique circumstances. For example, many but not all companies will do a proof-of-concept trial of servicing clients from a local base before committing to an overseas project.
At Exclaimer, the email signature software provider, they had spent a number of years selling to customers in overseas markets through online and through the Microsoft channel. This helped to establish the business case for overseas expansion, so we helped management to comprehensively research the market opportunity for a full-scale launch in the US, as well as tactical support in establishing their US office. The company’s US operation is now growing very rapidly.
In other cases, a full-scale launch makes sense. We invested in the premium food and beverage operator rhubarb in 2016, working with the company to achieve its ambition to launch new sites in the US. Initially, this work was focused on identifying which areas of the US represented the best opportunity and what type of proposition rhubarb should pursue. Later, as rhubarb progressed towards opening two new restaurants in the Hudson Yards complex in New York, we worked with the business to consider how it could service an adjacent events catering space. That led to the acquisition of Sonnier & Castle, to provide local operational bandwidth.
There is no one-size-fits-all approach to expanding internationally, but don’t be afraid of the opportunity. Over a quarter of Livingbridge’s current investee companies are already established overseas or have plans to do so – the potential of international markets to accelerate your growth is too great to ignore.
What does a good international expansion strategy look like?
Entering new overseas markets can help your business accelerate its growth at pace. But it’s important not to jump in at the first opportunity. With that opportunity always comes risk, and the best way to mitigate that and deliver sustainable growth that we’ve seen over 150+ investments, is to have a clear and well thought through international expansion strategy.
The starting point for that strategy should be an honest assessment of your business today – do you need to expand overseas and are you ready to do so? A driver may be that your growth prospects in your home market are beginning to look limited, or that you are being pulled into a new market by existing clients. But if you can’t identify a need, it may be too early to consider overseas markets. Similarly, even if those drivers are there, unless your business is stable, with strong financial foundations, and has the time and skills to commit to international expansion, moving forward may not be sensible. The crucial thing is not to put the core business at risk.
For those businesses that decide they are ready for international expansion, a good strategy sets out plans for each stage of the process:
- Building the rationale. It’s important to be strategic about international expansion right from the start. While a new market may look attractive at first sight, you need to build a hypothesis for launching your business there. Why is your chosen market attractive and why will your business succeed?
- Assessing the international expansion opportunity. Next, test out your hypothesis by collecting as much evidence as possible to support it or show it to be inaccurate. What demand do you already have in your chosen market – for example from inbound sales leads or customers requesting the service? And what intelligence do you have on the ground? Use market research, customer interviews and focus groups to build up this intelligence and mine your networks for their input and views.
- Developing a market entry plan.There are a number of different market entry strategies, depending on the nature of your business, your level of confidence and appetite for risk. You may initially look to pursue a remote market entry, selling in from home or via partners. A “lite” entry requires a little more commitment, perhaps putting some sales staff on the ground alongside limited fulfilment capabilities, or a “build” strategy is based on a full-scale launch in your new market. Many of our investees have looked to a “buy” strategy, acquiring a competitor or complementary business on the ground.
- Designing an overseas operational plan. The final part of the jigsaw is the part of your strategy that deals with execution – the operational platform you will use to deliver your international expansion strategy. You’ll need to consider every aspect of your business – recruitment and retention, sales and marketing, finance, technology and more, plus you’ll need to establish reporting lines back to the UK. Who will lead the new office on the ground? We believe getting the people right will be the biggest catalyst for success or failure when launching overseas, so make sure you’re happy with your team and people strategy before getting set up.
How Livingbridge can help?
Livingbridge’s specialist internationalisation team can help guide you at key junctures on your international expansion journey. For many entrepreneurs, new markets represent a step into the unknown, but our experience in delivering successful international expansion strategies with our investees, gives us a helpful perspective in ensuring you can navigate the challenges and the opportunities successfully.
Our growth acceleration team works alongside our people on the ground in our UK, Australia and United States offices, positioning us to support your strategy both at home and in your chosen market. We can anticipate what will work best, because we’ve seen it in practice and understand the impact of different strategies.
Take email signature software provider Exclaimer, where we invested in 2016. Its overseas expansion strategy began with a remote launch, as the business was able to sell to US customers online and through channel partners. Having proved the opportunity and assessed potential for further growth, we then helped Exclaimer to increase its presence in the US through the launch of an on-the-ground sales team that is now driving a significant increase in revenues.
Elsewhere, we invested in the financial services consultancy Catalyst in 2017 and began working with the company to explore expansion into the US. That process led to a merger with New York headquartered Sionic Advisers, a deal that is proving to be transformational, immediately increasing the revenues of the Group – now rebranded as Sionic – to $60m following the merger.
International expansion, in other words, can take many forms. But while there’s no single solution, every business needs a sound international expansion strategy. It’s your map for reaching your destination, rather than getting lost along the way, in fulfilling your business’s international potential.
What does a good international M&A strategy look like?
International mergers and acquisitions (M&A) can be an excellent launch pad into overseas markets or to further enhance your global capability. When it is delivered successfully it can completely transform your business and position it extremely well for unlocking future value. Successful M&A execution will usually depend on having a carefully planned international M&A strategy and sticking to it.
That strategy should begin with thinking hard about the business case for international M&A in the market you’re targeting. Potential drivers might include:
- Speed to market – the ambition to enter a new market with greater velocity and scale than is possible from an organic approach;
- Customer acquisition – the desire to build a beachhead from which you can build your global customer base;
- Talent acquisition – the attraction of hiring talent as a whole as you scale into new markets
- Defensive positioning – the determination to ensure competitors do not begin to take market share from your business.
The context of your international M&A strategy will naturally determine the detail of your planning and the criteria you set for identifying and analysing potential acquisition targets. And very often, particularly in markets where you do not already have a local presence, you’ll need support as you seek to execute on your strategy.
Livingbridge’s internationalisation team was set up to provide this guidance. Over more than 20 years, we’ve worked alongside investee businesses as they have launched into new markets, both organically and by acquisition. We have international offices in Melbourne and Boston, giving us the network, market knowledge and resources to support international M&A from strategy to execution.
Overcoming international expansion challenges
The best international M&A strategies focus on the challenges that occur both pre- and post-transaction. They set out plans for dealing with the issue of sourcing targets in the first place, as well as problems that could get in the way of successfully integrating an acquisition.
Livingbridge’s internationalisation team has worked with investee companies to address each of these potential sticking points. For example, our local teams have conducted market mapping exercises on behalf of investees, identifying the strengths and weaknesses of potential acquisitions. They’ve sourced targets in local markets and provided advice on the complexities of the transaction itself, including the nuances of local taxation, legal and regulatory systems that are often very different to the rules that apply in the UK. They’ve also worked with investees on detailed integration planning, taking into account questions such as how to ensure cultural fit, and how to structure remuneration and incentive plans to keep key talent on board.
This groundwork should be an essential part of your international M&A strategy, but also consider how you’ll measure success. What are your short-term targets in the context of your deal drivers and how will you measure these? Metrics might include revenue growth, cross-sales, cost reduction or talent retention. Set long-term objectives too, based on your strategic ambitions – how will you judge in, say, three years’ time whether the deal has been successful?
For some companies, success will be measured in conventional terms such as cost and revenue synergies, but you may have different ambitions – these might be around acquiring new skills and capabilities, for example, or expanding into adjacent products and services.
A comprehensive international M&A strategy means you can be confident when looking at transformative acquisitions, allowing to be bolder in the risks you take. For example, our investee company Sionic, a market-leading financial services consultant, was created through a merger with Catalyst Development, where we invested in 2017. Our international expansion team worked closely with Catalyst to build a market entry strategy for the US. Having identified New York headquartered Sionic Advisors as the ideal complementary business, we worked with both companies to complete the merger. Catalyst’s management team had no prior experience of M&A in the US, but our specialist team was able to guide them through a transformational deal that has seen revenues grow from c.£25m to more than £45m, employee numbers more than double and increased global offices to nine.
Our investee rhubarb was planning to expand into the US through the opening of a new restaurant in the Hudson Yards development in New York. We worked with the company to broaden this strategy by mapping potential acquisition targets in the events catering sector, given its significant experience of this market in the UK and the availability of events space in Hudson Yards. We identified Sonnier & Castle as a deal that would give rhubarb a scalable platform to service a growing US events business, and the two businesses merged in 2019.
Such transactions can be daunting, particularly for businesses with limited experience of international expansion or M&A. But our experience, based on 20 years of working with investee companies scaling globally, is that if the deal is right, it’s definitely worth it. The key is to have a clear international M&A strategy from the start.
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