Jake Radloff, Intertrust Group’s newly appointed Head of International Expansion in the Western US, helps clients and their advisors set up and maintain cross-border structures, transactions and operations. This has included greenfield expansions, setting up offices and regional headquarters, M&A and carve-out transactions, facilitating private equity investments, and setting up and administering foreign-domiciled investment funds.
With the year coming to an end, Jake has recapped his experience helping clients manage the challenges associated with expanding and operating internationally in 2020. If you’re reading this from a makeshift home office and dressed in clothes that put the casual in business casual, it may seem like an odd time to discuss expanding a business internationally. But despite (and in some circumstances, because of) the global pandemic, opportunities still exist around the world that investment managers, companies of all sizes and high-net-worth individuals want to take advantage of.
Our clients are continually assessing their international structures and operations, and evaluating the suitability of countries for future expansion, investment or structuring. This year has added some factors for consideration, such as public health risks, travel restrictions, the resiliency or disruption of supply chains, delays in governments incorporating legal entities and financial institutions opening bank accounts, and available government stimulus measures.
Uncertain political environments in the US and the UK, and changes to law and regulation globally, were less of a surprise. In 2020 we saw significant regulatory changes impacting cross-border business, such as the introduction of the Private Funds Law in the Cayman Islands, the EU directive on cross-border tax arrangements (DAC6) and various pieces of Brexit legislation in the UK.
It’s difficult for businesses to stay on top of these developments, so it’s critical that they leverage advisors and service providers with global capabilities, who are proactive in keeping their clients informed of developments in jurisdictions of interest, and who can make introductions to third parties such as government agencies, banks, real estate providers and 3PLs.
Unexpected, unprecedented financial pressure
The COVID-19 pandemic led to the most severe global economic contraction since the 1930s*. Economic activity has increased since initial lockdowns and the results of recent vaccine trials have been promising. However, some analysts predict that for the industries most affected by COVID-19, including entertainment, the arts, recreation, hospitality and travel, it could be 2025 before these sectors get back to their 2019 levels of activity**. In turn, many businesses in these industries and beyond are being forced to revise budgets, write-down investments and reduce costs.
In this environment, how can a new expansion or an existing international operation progress and succeed?
As always, but particularly at this time, we’ve found clients are benefitting from having a detailed understanding of the costs of their international structure and operations. With a clear and comprehensive plan of their goals for that country (hiring staff, receiving or making an investment, entering into a partnership) and the associated requirements and costs, clients have been able to find cost and time efficiencies by outsourcing certain tasks, consolidating existing service providers, renegotiating leases and removing redundant positions and entities.
Travel restrictions and digital transformation
COVID-19 induced travel restrictions have not only affected businesses like airlines and hotels, but all organizations with staff who would have previously travelled internationally to visit colleagues, clients, partners, acquisition targets or potential new markets.
While it’s difficult to imagine anything replicating the value of high quality, in-person interaction, we’ve seen widespread adoption of technology to communicate and maintain relationships. Video conferencing and remote due diligence tools were used extensively by one of our clients who effectively closed a cross-border M&A transaction despite not having met the acquisition target in person prior to closing the deal.
The acceleration of digital transformation is being experienced in our industry, with an increase in documents being signed and certified electronically, an uptick of workflow technology, as well as regulators and financial institutions becoming more accepting of electronic communication and KYC information. Intertrust Group clients have benefited from using our proprietary cloud based portal, IRIS, which has allowed our clients to view key data and documents for their Intertrust Group administered legal entities.
To overcome travel restrictions, our clients have also successfully leveraged our broad global presence, with local experts and partners able to complete in-person tasks with government authorities and financial institutions, assess new markets, hire staff, and meet regulatory requirements for entities, such as having a local resident director, company secretary and registered address.
Competing internal commitments
The events of 2020 have forced many clients to devote more attention than expected to tasks such as revising budgets, financial planning, dealing with debtors/creditors/banks/investors, HR issues stemming from staff working from home and redundancies, and changing business models. In some instances, this has made it harder for clients to devote time to progressing international expansions and existing international operations.
For those clients trying to advance international activities, we’ve noted a successful approach has been to assign an individual or small group to coordinate the process. This small group can then involve the necessary internal teams (legal, tax, accounting/finance, HR, etc.) as needed, while managing the requirements of external service providers and government organizations.
Jake is pleased to be leading Intertrust Group’s international expansion business in the Western US. In this role, Jake will work with Intertrust Group’s 4,000 professionals across 31 countries to deliver a tailored and seamless solution for clients and their advisors. To learn how Jake and Intertrust Group is able to assist your business, please get in touch.
* Financial Times – https://www.ft.com/content/272354f2-f970-4ae4-a8ae-848c4baf8f4a
** McKinsey & Company – https://www.mckinsey.com/featured-insights/coronavirus-leading-through-the-crisis/charting-the-path-to-the-next-normal/covid-19-recovery-in-hardest-hit-sectors-could-take-more-than-5-years#
Insights | Private Capital & Hedge Fund Services
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