Cross-border mergers and acquisitions (cross-border M&A) are the order of the day. With these international deals also come unique challenges. What are the biggest stumbling blocks dealmakers face when crossing borders?

'Cultural differences' are the biggest challenge in cross-border mergers and acquisitions, according to almost 60 percent of the 175 Dutch and Belgian M&A professionals who participated in the online survey for the M&A Trend Survey Benelux 2024 / 2025 by M&A and Ansarada. The 35 dealmakers that the M&A editorial team interviewed live agreed with that result. Of all respondents, more than 90 percent are involved in cross-border deals for their clients or portfolio companies in the case of investors.

Cultural differences and related communi­cation barriers (mentioned by almost 15 percent) can manifest themselves in all kinds of ways. In communication styles, for example, in decision-making processes, risk tolerance or in time perception. Philippe Craninx, Managing Partner at mergers and acquisitions specialist Moore Corporate Finance, aptly illustrates this with a seemingly simple example: "For a Dutch person, 'yes' means 'yes, I agree'. For a Flemish person it means 'yes, I understand you'. The Dutchman agrees and thinks the Flemish also agrees.”

And then the Dutch and Belgian cultures are still fairly close to each other, although the Netherlands is distinguished by an 'open and direct culture' in relation to Belgium, as Sergio Herrera, Managing Director M&A at Rabobank, calls it. “But how big should the cultural obstacles be in cross-border M&A involving Asian or American companies?” asks Hans Swinnen, Partner at private equity firm 3d investors. “The consequences can be quite disastrous”, says Sander Neeteson, Head of Corporate Finance at the bank ABN AMRO: “Cultural differences manifest themselves in different expectations and working methods, which can lead to misunderstandings and inefficiencies in the deal process.”

Not only are cultural obstacles the biggest challenge in cross-border M&A, they are also extremely difficult to solve, says Iris Hesselink, Partner at private equity firm Pontex Investment Partners: "Some challenges can be overcome by investing a lot of time and energy and investing money in doing proper due diligence so that you can overcome risks. That is a bit more difficult in this case. Managing cultural differences is difficult enough with two companies in the Netherlands, let alone if you do it across borders."

After cultural differences, integration problems are most often mentioned as a major challenge, by more than 41 percent of the professionals interviewed. These problems often only manifest themselves after the deal but can have disastrous consequences if not properly addressed.

Integration problems can arise in various areas within the organization. They often manifest themselves in the sphere of IT systems and technology, where different platforms and software solutions need to be harmonized. Business processes and workflows can also vary widely, leading to inefficiencies and misunderstandings. There can be major differences in personnel policy and employment conditions, which can lead to unrest and dissatisfaction among employees. Customer relations and market approaches are another potential problem area, especially if the merging companies serve different customer segments or employ different marketing strategies. Finally, reporting and compliance requirements can cause headaches, especially when companies from different countries have to deal with different laws and regulations.

Marcel Vlaar, Financial Due Diligence Partner at accounting and consultancy firm RSM Netherlands, frequently encounters integration challenges: "It’s often the differences in systems for human resources and accounting. Aligning them after a series of acquisitions can be a real struggle."

The causes of these integration issues vary. Kuif Klein Wassink and Ico Jalink, partners at law firm Dentons, believe they are often rooted in cultural differences and varying business practices across countries. Gülsüm Aslan and Rob Faasen, directors at Risk Capital Advisors, take a more assertive stance: "Integration problems are common, especially when attempting to realize synergies that are simply unrealistic."

Legal and regulatory complexity presents a significant challenge in cross-border mergers and acquisitions. Nearly 38 percent of M&A professionals cite this as one of the biggest obstacles. Add to that the 23 percent who mention tax issues as a major challenge, and the picture becomes clear: navigating through different legal systems can cause considerable headaches for dealmakers.

The legal complexity manifests in several areas. There are substantial differences in labour law, with varying rules on employment protection, working conditions, and union rights. Competition law also varies, with different interpretations of what is allowed. In the field of intellectual property, protection levels and enforcement mechanisms differ. Contract law varies in terms of what is considered binding and how contracts are interpreted. Additionally, foreign investments are increasingly scrutinized. Marco Gulpers, Head of Corporate Finance M&A Netherlands at ING Bank, highlights the growing complexity: "In cross-border deals, we see particular challenges around antitrust, foreign direct investment (FDI), and merger control."

Tax complexity is hardly any less challenging. Transfer pricing – the correct valuation of internal transactions between entities in different countries – is a key issue. Additionally, there are variations in withholding taxes on dividends, interest, and royalties. Navigating a web of bilateral tax treaties presents a challenge in itself. Indirect taxes, such as differences in VAT systems, add an extra layer of complexity. Finally, there are exit taxes when relocating assets or headquarters. "My top concern is tax", says Peter Zwijnenburg, Managing Director M&A and Transaction Solutions EMEA at Aon, a consultancy for risk, pension, and health solutions. He points to the "increasingly aggressive stances taken by local tax authorities towards large corporations and private equity. Precisely the companies that are active in M&A."

This is often underestimated, says Craninx. According to him, there is little attention paid to "the legal and tax structuring and its effects on cash flow, among other things. There are often barriers that turn out to be unpleasant surprises. Within Europe, we usually don't face currency exchange issues, but outside of it, we do. We're not used to that. Additionally, you often deal with withholding tax or differences in dividend treatment. Each country has its own set of rules. You need to map them out to keep your cash flow under control."

That’s not always easy, warns Jan-Hendrik Horsmeier, a partner at law firm Clifford Chance: "Uncertainty about future tax regimes and their impact on returns is a major issue. If the rules change mid-game and suddenly 15 percent of your return disappears, that’s a huge loss."

The valuation gap, which can sometimes be an obstacle in domestic M&A, is rarely mentioned (by less than 20 percent of respondents) as a major challenge in cross-border deals. Instead, dealmakers appear to be focused on bridging cultural gaps, tackling integration issues and navigating complex international laws and regulations. How they do this will be discussed in a next chapter.