Insider Business Club: investing abroad

Is it household names or smaller companies that account for most overseas
investment out of the UK?

Richard Kilner, mD, Commonwealth of Pennsylvania European investment

If you are looking at the dollar values or the sterling values then the
answer is ‘yes’.

Major merger and acquisition and investments from the FTSE 250 companies
account for the bulk, but in terms of the numbers of projects, we are seeing an
increasing number of SMEs and particularly technology-based enterprises actually
replicating themselves in the US successfully.

It’s not just telecoms we’re looking at but IT and digital as well.

As far as the state of Pennsylvania is concerned, we are the number one
pharmaceutical state and that is driving life sciences biotech investment. It is
across a range of technologies and it is an area where the UK has competitive
edge worldwide.

From the US perspective the principal driving force is market access. What is
driving that as a secondary facet of investment is the competitiveness of
private enterprise within the market and the issue of currency.

How important is having a recognised brand when it comes to investing

Stephen Cheilotis, chairman, Superbrands Councils

If you can establish a strong brand it gives you competitive advantage, which
may give you the opportunity to expand internationally.

When you are doing so, you have to be very careful and the same way that you
do due diligence on a company you also have to do brand due diligence on a
market. So, for example, Tesco in some countries uses the Tesco brand because it
understands that the British connections will work there but in other markets –
you’ve mentioned the US, obviously, where it is about to launch – it is not
using the Tesco name.

It is important to understand what the market wants, what the market will
accept and particularly if you are not going to just necessarily grow
organically but acquire brands. For example when Vodafone went on its spending
spree and bought up local mobile operators across the world, it had to do
careful brand due diligence in understanding whether it should replace the local
brand name with the Vodafone name.

It is important to get that branding right, but a strong brand can help you
explore abroad but you can’t assume you can just roll your brand out everywhere
and it will work.

Do most investments take the form of launch, acquisition or

Rob Bratby, corporate partner, Mayer, Brown Rowe & Maw

There is a real mix when you look at market entry strategies. They are
pursued by different companies in different segments and also depending on where
they are investing.

A classic way of breaking it down, is to say you build, you go in and set
yourself up, you buy so you go in and acquire an exisiting business or you
partner with somebody.

You need brand diligence, normal diligence that you have in a domestic
acquisition, and there is also diligence around political risks and the
operating environment.

Areas like India and China are hot at the moment in terms of destinations for
investments. There may be restrictions on going in yourself and setting up,
there may be licencing problems, there may be foreign currency requirements, or

In those countries we are seeing quite a lot of partnering activity and
people trying to find alternative methods of market entry, where the market
isn’t entirely liberalised.

The single market in Europe, increasingly liberalised trade and the WTO have
opened up a lot of markets. People are able to choose the most economically
efficient way to enter the market – they can go in themselves, or they can buy.
If you go back, 15 to 20 years there were a lot more restrictions. It’s only
really now in WTO countries where companies really have the choice about how
they do that and whether they can enter by going in and setting themselves up.

Chaired by Damian Wild

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