How do search funds handle cross-border acquisitions and international expansion?

Cross-border search fund acquisitions and international expansion introduce layers of complexity beyond domestic transactions, though they can unlock significant value opportunities. Understanding the challenges and strategies helps searchers evaluate whether international approaches fit their circumstances. Geographic scope decisions begin during the search phase. Most searchers focus on domestic markets where they understand business culture, legal frameworks, and language. French searchers typically target France and occasionally francophone Belgium or Switzerland. However, some ambitious searchers pursue pan-European strategies, particularly those with multilingual capabilities or international business experience. The rationale for international focus includes access to larger target pools—combining multiple countries expands available opportunities, arbitrage opportunities where valuations differ across borders, and competitive advantages if the searcher has unique language skills or market knowledge. However, significant challenges exist. Legal and regulatory frameworks vary dramatically—employment law, tax codes, corporate governance requirements, and insolvency procedures differ across jurisdictions. Searchers must engage local legal counsel in each country, increasing due diligence costs and complexity. Tax structuring becomes critical to avoid double taxation and optimize efficiency. Language barriers complicate relationship building even when the searcher speaks the language—nuances in business communication, contract interpretation, and cultural expectations matter enormously. A French searcher acquiring in Germany must understand not just German language but German business culture, which emphasizes different decision-making processes and management styles. Currency risk introduces additional complexity. If the searcher raises capital in euros but acquires a company generating revenue in pounds, Swiss francs, or other currencies, exchange rate fluctuations affect returns unpredictably. Hedging strategies can mitigate this but add cost and complexity. Post-acquisition management challenges intensify across borders. The searcher cannot easily relocate to operate the business if it's in another country, yet remote management of recently acquired companies proves extremely difficult. Some searchers attempt to maintain residence near the acquired company while managing investor relationships remotely, but this strains personal lives and board communication. International expansion after acquiring a domestic platform presents more manageable complexity. Once the searcher has stabilized the initial acquisition and proven operational competence, expanding into adjacent countries through organic growth or add-on acquisitions becomes feasible. For example, a French searcher acquiring a software business might expand into Belgium and Switzerland where language barriers are minimal and business practices similar. The board's role becomes even more critical for international transactions. Investors with international experience can guide regulatory navigation, introduce local advisors, and help assess cultural fit. However, many search fund investors focus domestically, so international searchers may need to specifically cultivate investor bases with relevant geographic expertise. Banking and financing complexity increases internationally. Lenders typically prefer domestic transactions where they understand legal recourse and can monitor collateral easily. Cross-border acquisitions may require multiple banking relationships or specialized international lenders charging premium rates. Some successful international search fund strategies include focusing on border regions where business naturally spans countries (for example, companies serving both French and Belgian markets from locations near the border), targeting diaspora businesses where the searcher's cultural background provides unique access (such as a French searcher of Italian heritage targeting Italian family businesses), or pursuing international roll-up strategies where the thesis explicitly involves building multi-country platforms. The EU's regulatory harmonization reduces some cross-border challenges compared to truly international transactions. A French searcher acquiring in Spain faces different laws but operates within the same broad regulatory framework, free movement of capital, and dispute resolution systems. Acquiring outside the EU—in the UK post-Brexit, Switzerland, or beyond Europe—introduces greater complexity. Most search fund experts recommend that first-time searchers focus domestically unless they have compelling reasons and resources for international approaches. The learning curve of operating a business for the first time is steep enough without adding international complexity. However, for second-time searchers or those with specific international expertise, cross-border opportunities can provide attractive differentiation and access to less competitive deal flow.