Middle-market businesses seeking buyers from other countries face challenges — but might reap big rewards

By James S. Cassel

For middle-market companies looking to be acquired, a foreign buyer can sometimes prove to be the best fit, but finding that buyer and closing such a deal can make for a complicated process with unique challenges.

Opening your business to being acquired by a foreign buyer, thereby adding to your list of suitors, can be a good way to increase competition and therefore the ultimate sale price. Oftentimes, foreign buyers are willing to pay more than domestic acquirers when they see a strategic advantage or can add value by getting access to a U.S. platform and the U.S. market. It may also give them instant credibility if they are buying a trusted brand.

More than just money, you may also find that a foreign buyer can sometimes be a good strategic fit as well. Based on the calculus of what your company and the foreign buyer are looking for, the advantages that come with access to a new market, good supply chains and distribution, useful proprietary technology, and other possible synergies can make for an attractive deal for both parties.

But how do you find the right foreign buyer? The first step is to consult with an investment banker with experience and relationships with buyers outside of the U.S. and who knows the best ways to access and vet these potential buyers. You must share with that investment banker exactly what you want out of the sale: Do you simply want to sell, or are you are interested in leaving behind a legacy? Are you looking for a quick exit, or do you want to remain in a leadership role, and if so, for how long? These factors may have significant implications for the final deal, one that could mean selling 100% of the business, or just a minority or majority position.

You may also find that the ideal foreign buyer is someone you are already doing business with, or even partnering with. It might be one of your competitors. Whomever the best choice is, it will be up to your investment banker to vet and approach that potential buyer.

Still, finding the best foreign buyer is only half the task. You also have to address the cultural, regulatory, legal and financial challenges of closing the deal.

To begin with, in many cases, a company looking to sell to a foreign buyer may need to notify the Committee on Foreign Investment in the United States

(CFIUS) and then get past that interagency committee’s regulatory review. A good, experienced legal team is a must. With increasing trade secret thefts, mounting concern over technology transfers, national security entering into the equation, and scrutiny moving beyond Chinese and Russian buyers, you may be surprised at what issues may arise.

Even with a qualified, prospective foreign buyer who can clear regulatory complications, you must still assess the buyer’s grasp of our cultural, legal, and financial hurdles, which may extend the time it takes to close. You and your investment banker may need to educate the buyer and guide them through the deal. Does the buyer, for example, understand how to interpret

U.S. financial statements and documentation? Does the buyer have sufficient knowledge of our environmental and labor laws? Will they be able to secure access to lenders who will loan to a foreign buyer for an acquisition? Will they be able to move money into the U.S. to close the deal in a timely manner? Not all can.

Expanding the universe of potential buyers for your company beyond the U.S. can help you secure the best deal, ideally resulting in a great strategic fit for both parties. But closing that deal will be a much greater challenge and will take longer than selling domestically. Though the issues you will face will be more complex, addressing them early on may result not only in the best price for your company, but an exit that has meaning for you beyond your bottom line.

James S. Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle- market companies. He may be reached via email at jcassel@casselsalpeter.com or via LinkedIn at https://www.linkedin.com/in/jamesscassel.

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Why Alphabet’s Acquisition of Fitbit Is a Master Move

By Tom Taulli

Earlier in the week, there was lots of buzz that Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) would acquire Fitbit (NYSE:FIT), whose shares spiked more than 15% today on the news (the main report came from Reuters). While such rumors often fizzle, this one certainly did not. Today the announcement hit the wires: Google has agreed to shell out $2.1 billion for the company. All in all, I think the deal is a spot on — and should be a catalyst for Google stock.

True, it’s still relatively small, as Alphabet’s market cap is a whopping $870 billion. Yet, Fit is likely going to provide quite a bit of leverage. Let’s face it, Google has tried to get a piece of the wearables market with its Wear OS. However, there has been little progress so far.

How Fitbit Benefits Google Stock

So with Fit, Google will have about 6% of the global market (this is based on data from IDC). This will definitely be a good launching pad. According to Fitbit CEO and co-founder James Park: “Google is an ideal partner to advance our mission. With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead.”

But perhaps the biggest benefit — in terms of the impact on Google stock — would be the healthcare opportunity. During the past few years, Fitbit has gotten traction with striking deals with health plans. The company has also been working hard to get FDA approvals.

Oh, and yes, there is the treasure trove of data, which extends 10-plus years. Note that Google is a global leader in AI and this technology will likely prove extremely useful in transforming the healthcare industry. As CEO Sundar Pichai noted on the latest earnings call, the company continues to push the boundaries of innovation, such as with the creation of a new kind of neural network that improves web services as well as breakthroughs in quantum computing.

But the fast-growing cloud business should also be a driver for Google stock when it comes to healthcare. In September, the company announced a partnership with the Mayo Clinic to help with clinical experiences, diagnosis and research.

“Since Google has numerous health initiatives at present, those should complement what Fitbit brings to the table,” said James Cassel, who is the chairman and co-founder of investment banking firm Cassel Salpeter & Co. (in an email interview). “Access to the installed base could be very helpful to Google’s healthcare initiative Project Baseline – a partnership with Duke University School of Medicine, Stanford Medicine and the American Heart Association – as well as other health-centric projects they are working on. Access to big data is crucial for the future of healthcare and Fitbit has access to a lot of information.”

Bottom Line on the Alphabet Stock Price

The wearables market is simply too large for Google to ignore. For example, as seen with Apple’s (NASDAQ:AAPL) latest earnings report, the category is quite lucrative and a source of strong growth.

The company’s assortment of products — like the Watch, HomePod smart speaker and AirPods — generated revenues of $6.5 billion in the latest quarter, up 54% on a year-over-year basis (this is nearly as much as the Mac business!) In fact, AAPL has gotten traction with its Watch in deals with United Health (NYSE:UNH) and CVS (NYSE:CVS).

True, Fitbit has its issues. Growth has been lagging and the competition has remained intense. But again, Google should be an ideal partner — which should allow for a classic win-win partnership.

Click here to view the PDF.

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Alphabet’s Acquisition of Fitbit is a Case of Perfect Timing

By Chris Markoch

On Friday, the markets waited in anticipation as trading on Fitbit (NYSE:FIT) stock was paused. Shortly after the markets opened, the news broke that Alphabet will buy Fitbit for $2.1 billion. Shares of FIT soared 15% after the announcement. Alphabet stock is up about 3.5% in mid-day trading. Although this news was being telegraphed for several days, the timing of the announcement was perfectly timed as investors are looking to capitalize on new trends in the tech sector.

The wearables market is taking off

There are many reasons why this acquisition makes sense for Alphabet. One of the primary issues is related to the growth in the wearables category. Once thought an ill-fated fashion trend, Apple (NASDAQ:AAPL) showed in its earnings report on October 30 that demand for wearables is growing. Apple reported an eye-popping 54.4% year-over-year increase in revenue from wearables. This means that Apple’s wearables market, which has only been around since 2015, has a bigger share of Apple’s bottom line than the iPad.

It was not immediately clear how much of the $6.5 billion number was tied to the Apple Watch. However, Apple’s wearables market is made up of two product lines: the Apple Watch and its AirPods line. So it’s reasonable to assume that the Apple Watch was a significant part of this growth. Apple did say that three out of four Apple Watch purchases were made by new consumers.

It won’t be known for several years if this kind of growth is sustainable. But for now, Apple looks to be successfully making in-roads within its iOS ecosystem. Instead of users choosing either an iPhone or an Apple Watch, they’re starting to say “why not both”?

Can Alphabet take a bite out of Apple’s momentum?

Alphabet has been trying to get into the wearables category with its Wear OS. But the company has struggled to get traction. The acquisition of Fitbit immediately gives Alphabet access to approximately 6% of the global market. While that number may not make Apple quiver anytime soon, it’s enough to get attention.

After the announcement, Fitbit CEO James Park said, “Google is an ideal partner to advance our mission. With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster and make health even more accessible to everyone.”

That last part, making health accessible, is one of the keys to this announcement. When devices like the Fitbit and Apple Watch were introduced, the ultimate question that had to be asked was the why. It was simple enough to see what the device did, but why was that important.

But wearables, like Amazon’s (NASDAQ:AMZN) Alexa and the Google Assistant are ideas that were ahead of their time. By this I mean they had to be created  as a vessel to open up the possibilities. Among those possibilities is the ability of these devices to collect data. And there is almost no other industry that offers greater possibilities for the use of big data than healthcare. That’s   where Alphabet comes in. As the global leader in artificial intelligence (AI), they are an ideal partner to make use of the vast amounts of data Fitbit has gathered over 10 years.

Fitbit has been making deals with health care plans and working to get FDA approvals. All of which complements work that Alphabet has already been doing, says James Cassel, chairman and co-founder of investment banking firm Cassel Salpeter & Co. In an email interview, Cassel said of the partnership, “Since Google has numerous health initiatives at present, those should complement what Fitbit brings to the table. Access to the installed base could be very helpful to Google’s healthcare initiative Project Baseline … as well as other health-centric projects they are working on.”

Is this deal a slam dunk for investors?

Investors will be cautiously optimistic about the opportunities this deal presents. With a market cap of $870 billion, the $2.1 billion acquisition wouldn’t seem like a huge expense for Alphabet. But FIT will still be leverage on Alphabet’s balance sheet. And there will certainly be more costs as the companies integrate.

However, like the wearables category in general, this is probably a case where the partnership has to come before the profit. Separately, Fitbit has struggled with increasing competition in the wearables category. And Alphabet has struggled to get its own line of wearables off the ground. Together, this looks like a marriage of two strengths.

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Why Alphabet’s Acquisition of Fitbit Is a Master Move

By Tom Taulli

Granted, it would be a small deal. Yet it would still have lots of leverage.

Earlier in the week, there was lots of buzz that Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) would acquire Fitbit (NYSE:FIT), whose shares spiked more than 15% today on the news (the main report came from Reuters). While such rumors often fizzle, this one certainly did not. Today the announcement hit the wires: Google has agreed to shell out $2.1 billion for the company. All in all, I think the deal is a spot on — and should be a catalyst for Google stock.

True, it’s still relatively small, as Alphabet’s market cap is a whopping $870 billion. Yet, Fit is likely going to provide quite a bit of leverage. Let’s face it, Google has tried to get a piece of the wearables market with its Wear OS. However, there has been little progress so far.

How Fitbit Benefits Google Stock

So with Fit, Google will have about 6% of the global market (this is based on data from IDC). This will definitely be a good launching pad. According to Fitbit CEO and co-founder James Park: “Google is an ideal partner to advance our mission. With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead.”

But perhaps the biggest benefit — in terms of the impact on Google stock — would be the healthcare opportunity. During the past few years, Fitbit has gotten traction with striking deals with health plans. The company has also been working hard to get FDA approvals.

Oh, and yes, there is the treasure trove of data, which extends 10-plus years. Note that Google is a global leader in AI and this technology will likely prove extremely useful in transforming the healthcare industry. As CEO Sundar Pichai noted on the latest earnings call, the company continues to push the boundaries of innovation, such as with the creation of a new kind of neural network that improves web services as well as breakthroughs in quantum computing.

But the fast-growing cloud business should also be a driver for Google stock when it comes to healthcare. In September, the company announced a partnership with the Mayo Clinic to help with clinical experiences, diagnosis and research.

“Since Google has numerous health initiatives at present, those should complement what Fitbit brings to the table,” said James Cassel, who is the chairman and co-founder of investment banking firm Cassel Salpeter & Co. (in an email interview). “Access to the installed base could be very helpful to Google’s healthcare initiative Project Baseline – a partnership with Duke University School of Medicine, Stanford Medicine and the American Heart Association – as well as other health-centric projects they are working on. Access to big data is crucial for the future of healthcare and Fitbit has access to a lot of information.”

Bottom Line on the Alphabet Stock Price

The wearables market is simply too large for Google to ignore. For example, as seen with Apple’s (NASDAQ:AAPL) latest earnings report, the category is quite lucrative and a source of strong growth.

The company’s assortment of products — like the Watch, HomePod smart speaker and AirPods — generated revenues of $6.5 billion in the latest quarter, up 54% on a year-over-year basis (this is nearly as much as the Mac business!) In fact, AAPL has gotten traction with its Watch in deals with United Health (NYSE:UNH) and CVS (NYSE:CVS).

True, Fitbit has its issues. Growth has been lagging and the competition has remained intense. But again, Google should be an ideal partner — which should allow for a classic win-win partnership.

Click here to view the PDF.

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Why Alphabet’s Acquisition of Fitbit Is a Master Move

By Tom Taulli

Earlier in the week, there was lots of buzz that Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) would acquire Fitbit (NYSE:FIT), whose shares spiked more than 15% today on the news (the main report came from Reuters). While such rumors often fizzle, this one certainly did not. Today the announcement hit the wires: Google has agreed to shell out $2.1 billion for the company. All in all, I think the deal is a spot on — and should be a catalyst for Google stock.

True, it’s still relatively small, as Alphabet’s market cap is a whopping $870 billion. Yet, Fit is likely going to provide quite a bit of leverage. Let’s face it, Google has tried to get a piece of the wearables market with its Wear OS. However, there has been little progress so far.

How Fitbit Benefits Google Stock

So with Fit, Google will have about 6% of the global market (this is based on data from IDC). This will definitely be a good launching pad. According to Fitbit CEO and co-founder James Park: “Google is an ideal partner to advance our mission. With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead.”

But perhaps the biggest benefit — in terms of the impact on Google stock — would be the healthcare opportunity. During the past few years, Fitbit has gotten traction with striking deals with health plans. The company has also been working hard to get FDA approvals.

Oh, and yes, there is the treasure trove of data, which extends 10-plus years. Note that Google is a global leader in AI and this technology will likely prove extremely useful in transforming the healthcare industry. As CEO Sundar Pichai noted on the latest earnings call, the company continues to push the boundaries of innovation, such as with the creation of a new kind of neural network that improves web services as well as breakthroughs in quantum computing.

But the fast-growing cloud business should also be a driver for Google stock when it comes to healthcare. In September, the company announced a partnership with the Mayo Clinic to help with clinical experiences, diagnosis and research.

“Since Google has numerous health initiatives at present, those should complement what Fitbit brings to the table,” said James Cassel, who is the chairman and co-founder of investment banking firm Cassel Salpeter & Co. (in an email interview). “Access to the installed base could be very helpful to Google’s healthcare initiative Project Baseline – a partnership with Duke University School of Medicine, Stanford Medicine and the American Heart Association – as well as other health-centric projects they are working on. Access to big data is crucial for the future of healthcare and Fitbit has access to a lot of information.”

Bottom Line on the Alphabet Stock Price

The wearables market is simply too large for Google to ignore. For example, as seen with Apple’s (NASDAQ:AAPL) latest earnings report, the category is quite lucrative and a source of strong growth.

The company’s assortment of products — like the Watch, HomePod smart speaker and AirPods — generated revenues of $6.5 billion in the latest quarter, up 54% on a year-over-year basis (this is nearly as much as the Mac business!) In fact, AAPL has gotten traction with its Watch in deals with United Health (NYSE:UNH) and CVS (NYSE:CVS).

True, Fitbit has its issues. Growth has been lagging and the competition has remained intense. But again, Google should be an ideal partner — which should allow for a classic win-win partnership.

Click here to view the PDF.