Now is the time for firms to re-assess opportunities and presence in overseas markets
Many firms will already have some form of presence overseas – perhaps offices established from advising a client overseas or from an alliance, or network arrangement.
Often these arrangements have been in place for many years but with the recent economic improvements, firms should take a moment to consider whether their overseas presence is appropriate to their needs, and whether this presence can service their clients – now, and in the future.
For those firms without an overseas presence, now is a good time to consider whether there are opportunities available for exploitation in overseas markets, or whether their existing structure is sufficient to continue attracting and servicing clients.
A number of larger property advisers have had well-established offices overseas to service global clients for several years. For other firms the resource and expertise required to both assess the opportunity and carry out the plan is considerable and might be too daunting for some. However, a number of faster growing markets have a similar culture, language and business framework to the UK, making the expansion less daunting. There are also a number of ways to establish an overseas presence to fit different circumstances. Before taking the step to expand, a firm should consider a number of key points.
Control and ownership
Some firms prefer to be in complete control of their international expansion, for example by opening an office abroad, sending an existing director to start the office and hire local staff. Others will prefer to find a strong local firm to acquire and then integrate it into their existing structure. Alternatively, firms can access the benefits of having overseas offices while limiting the cost of investment and the inherent risk, by joining an established network or alliance of firms.
Strategy and planning
Whatever a firm’s initial thoughts and objectives on expansion, a clear strategy and plan are essential at the outset. Insufficient planning can often result in significant costs being incurred along with potential damage to a firm’s reputation. Sometimes it is necessary to establish overseas offices in order to service a client’s requirements. This can provide a rationale for the new office and give it a certain level of business from the start but thought needs to be given to what will happen after that client project ends. If serving global clients is key to a firm’s future plans, then it may be essential to establish a number of overseas offices rather than just one. Overall, the rationale needs complete clarity so that management is clear on both the short- and long-term objectives for the firm.
If a firm needs to have offices of a substantial size from the outset then it may be that finding a strong local firm with which to merge or acquire is the right solution, rather than establishing a new office from scratch. Carrying out mergers and acquisitions will need careful research, due diligence and advice on taxation and structuring the deal. Clearly it is not something to be undertaken lightly but, with the right amount of careful planning and advice, a well-executed merger can really transform a firm and bring multiple benefits on a larger scale, often much quicker than establishing a new office.
Funding
Alongside a firm’s plan for expansion there will need to be considerations over funding. Firms will need the initial capital for the operation and be aware of any potential ongoing requirements to fund working capital in order to make an overseas office profitable. Whether the funds are provided from within the firm, or from outside lending, there needs to be an agreed plan and clarity for all involved.
Culture
A firm’s culture is difficult to define, but when adding new offices it is important that this is not forgotten. Overseas offices will not necessarily fit perfectly, but spending quality time with new colleagues is essential to build trust and ensure that cultures and goals are aligned. This takes time and cost but it is a necessary investment.
Reward and talent mobility
It is important to consider whether staff in overseas offices will be rewarded on a similar basis to those in the rest of the group. Often it is best to align reward policies across the group, but care needs to be taken to review local tax implications and make any necessary changes.
The mobility of talent is also an interesting challenge. Many new overseas offices will need UK talent to move overseas to assist with integration and development of the new office. This can also assist with the transfer of cultures in order to align the way work is undertaken.
For short-term secondments, there will be the need to ensure an employee sent abroad receives similar remuneration to their UK role, but matters such as accommodation and flights home also need to be built into the remuneration package. For senior individuals moving at the request of the firm, there will need to be thought given to whether the firm will cover any additional tax so that they are not disadvantaged. On the other hand, what happens if they are moving to a “nil” or low tax country? The policies needed for families moving with an employee also need to be carefully thought through.
Management implications
Once set up, the overall supervision of the new office needs to be considered. It will take senior management time and this needs to be appropriate to the importance, risks and benefits of the overseas operation. Frequent face-time is often needed to ensure the benefits of the new office are realised. However, the impact of management travelling over long distances can be overlooked – how will it affect the time spent managing UK operations?
Moving forward
With clients requiring advisers who can assist them both in the UK and overseas, there are significant benefits to be gained from international expansion. Many firms will be reviewing their strategic direction now and international expansion should definitely be on the list.
Nick Carter-Pegg is a partner and head of professional services at BDO LLP
