Despite the allure of global growth, 68% of M&A activity remains confined within national borders. Many wonder why there are so few cross-border M&A deals, given that local markets are often small and the potential of the global stage is vast.
However, the experience of ONEtoONE Corporate Finance across thousands of mandates has led to a singular conclusion: The primary obstacle to cross-border M&A is fundamentally an information problem.
The "Uncertainty Tax" on capital
We often discuss financial conditions—local credit availability, source-country financial depth, and institutional quality—as if they are merely about the movement of money. In reality, they are proxies for knowledge.
Consequently, an acquirer’s ability to evaluate and transact in a foreign market depends on their ability to bridge the gap between what is known and what is hidden. When that understanding is absent, deals do not happen. When it is present—facilitated by local relationships and advisory expertise—deals are not only more likely to close but are structurally more likely to generate long-term value.
Why financial sophistication matters
There is a direct correlation between the depth of the acquirer’s home market and the incidence of outbound M&A. Financial sophistication at home provides the data infrastructure and risk-management tools that enable international action.
However, we find that local host-country finance and source-country finance operate as substitutes:
- Where local credit conditions are strong, they offset the constraints of the acquirer’s home country.
- Where local conditions are weak, the acquirer must rely entirely on their own “information confidence” to commit capital.
The Mid-Market and the Private Data Gap
Private targets represent the vast majority of mid-market M&A, yet they face substantially higher information asymmetry. In many jurisdictions, there is no publicly available financial information. Data must be painstakingly compiled by a buyer’s advisor just to determine a fair offer price.
To truly understand a target company, an acquirer must look beyond the balance sheet and engage with:
- Industry Peers: To verify market positioning.
- Clients: To test brand loyalty and reputation.
- Former Employees: To uncover internal culture and unwritten risks.
These insights are often accessible only to local financial advisors who speak the language and inhabit the same ecosystem. This risk is highest in all-cash transactions, where the acquirer bears the total valuation risk. Thus, local knowledge that reduces this uncertainty directly increases the willingness to transact.
A structural solution: embedding knowledge locally
The requirement for local intelligence is heightened in developing economies. This is why, in addition to presence in every major developed market, ONEtoONE has established teams in emerging hubs such as Manila, Medellín, Kuala Lumpur, Ho Chi Minh, Quito, and Lusaka. In these regions, “remote analysis” is insufficient. Knowledge of the specific market dynamics and local reputations is the only way to execute a successful transaction.
The takeaway: Cross-border M&A is not held back by a shortage of capital or a lack of strategic ambition. It is held back by the difficulty of gaining enough knowledge to act with confidence.
The solution is not to wait for global markets to become more transparent. It is to embed knowledge locally. By maintaining staffed country teams across 55 markets and 91 cities, ONEtoONE effectively reduces information asymmetry. Therefore, we bridge the gap that keeps 68% of deals domestic, providing a structural advantage that no amount of desk research can replicate.
Don’t let information gaps limit your growth potential.
Contact our global team today to speak with a local expert in your target market, or explore our full suite of M&A services to see how we can help you navigate your next cross-border transaction with confidence.