Jabril Bensedrine is Managing Partner of The Triana Group, Inc., which supports small and mid-sized European companies with market entry and development in the U.S. In addition to providing turnkey services, business expertise and operational support, Triana offers its member companies a high-level business network and priority access to financing solutions through its partnership with Meeschaert Capital Markets. The Group's offices are located in Paris, France, and New York.
We asked Bensedrine for his expertise on in-bound activity and EU technology opportunities.
M&A Advisor: Your firm has been engaged in the EU technology and life sciences markets in Europe for some time. How do you compare the US market in these sectors?
Jabril Bensedrine: The Triana Group supports small and mid-sized European technology and life sciences companies with market entry and development in the U.S. The most obvious difference we see between the EU and the U.S. technology and life sciences sectors is the fact that the U.S. is one large market for both these industries. In Europe, once a company experiences success at home, it begins to branch out to neighboring countries, each with its own regulations and unique business culture. The American market, on the other hand, is often larger than the combined European Union market. It has a more homogeneous business culture and one set of federal regulations, but with many exceptions, of course. America also is the leading market where a technology innovator has to succeed to really take a global scale. So it's very important for a small- to mid-sized, entrepreneurial company that wants to become a global player to set up a successful business in the United States.
M.A.: Why is your firm focused on in-bound US deals?
J.B.: There are lots of expansion strategies for European companies into the U.S. market, but a very high failure rate when you consider the technology and business success these same companies achieve in Europe. Although research and development in Europe are well supported by governments and institutions, even with some of the best engineering in the world, very few European technology companies make it in the U.S. Many successful European retail, automotive and technology companies never transitioned viably into the U.S. market.
At Triana Group, we see a gap between what these European companies can do and what they actually achieve, and it's not due to a lack of technology or funding. For them, it's not realistic to try and build a presence from scratch in the U.S. There's just too much deal making here that requires an insider's know how.
At Triana Group, we help European companies become successful in America by working with Americans in the American way. We fill that gap and serve as their initial business partner for the U.S. market. We match each company up with U.S.-based financial, legal, technical and marketing partners who can ensure the success of our portfolio companies just as they have done for U.S. companies. For a well managed U.S. midsized company, making multi-dozen or multi-hundred million-dollar deals and reaching $1-to-$2 billion in annual revenue is a good but not exceptional performance. For a European company, doing the same and reaching such a size on the U.S. market is rarer than it should be.
Triana also works with a panel of numerous industry experts who hold leadership positions in the private and public sectors. It includes CEOs and senior executives within the worlds of finance and private equity, directors of public institutions, and managers of international corporations.
In addition, we are looking for U.S. companies that want to expand and connect with European companies and markets. The level of globalization potential of U.S. private equity-funded companies starting to look at global markets and expansion into the European market is considerable. Within our industry fields, we have the experience and people required to make this happen.
M.A.: What advice is your financial partner giving you with regards to acquisitions and/or sales?
J.B.: Triana Group recently announced a partnership with Meeschaert Capital Markets, Inc., the North American arm of France's first private banking company. This partnership enables Triana to accelerate our current and future portfolio companies' development and allows Meeschaert Capital Markets to provide a range of attractive investment opportunities.
The Triana Group works with a dozen promising portfolio companies. As the need arises, we present these companies and others who are positioned to expand internationally to Meeschaert Capital Markets for investment and other financing solutions. Meeschaert Capital Markets conducts its due diligence and make investment decisions independently.
Because Meeschaert is both a European and a U.S. company with presence in both places, it has the right mindset for this assignment. Meeschaert manages funds and has access to everything from wealthy families to venture capital funds. So they can provide a range of financing options from an angel investment to VC or private equity. They also can provide the appropriate follow on financing as needed.
Right now we are looking for a U.S. acquisition in the IT services field for a midmarket European software company. The current valuation of this European company is one-third of what it will probably be at the end of the acquisition process. This is typically the kind of opportunity that Meeschaert is able to help us with and can also bring to its clients and partners.
M.A.: What competitive advantages do you look for in a potential portfolio company?
J.B.: We identify companies for whom we could be the first-level U.S. partner. Ideally, these are great companies that are leaders in their fields with an innovative technology with solid barriers to entry and revenue generating, blue-chip clients, as well as a world-class management team with a smart view of the global marketplace. For instance, we recently had a French portfolio company visiting New York and introduced them to several potential partners. Each and every one of those partners remarked on how "phenomenal" the portfolio company's offering is. This wasn't a surprise to us since the company has consistently gained market share in the European market and is winning against competitors that are also present here, and with large corporate customers that are often similar in size and requirements in the U.S. and in Europe. But until we introduced it to U.S. partners, the company was still totally unknown here, and it would be under-valued because it lacked data regarding its U.S. growth potential. Validating its U.S. potential increased its "virtual" valuation considerably.
Our ability to broker deals is very important for small to mid-sized companies who are focused on their existing customers back in Europe. Instead of them doing business with one or two U.S. partners, we can arrange for them to do so much more and really experience a solid U.S. expansion.
Triana Group assesses companies and represents them here, but we are not investment bankers, so we don't broker deals. But the Meeschaert group has such capability; it's part of what they bring to the table. However, we can also internally bring value into the deal making process. For example, we represent a leading European ERP software company seeking to expand in the U.S. Our assignment is to be their permanent antenna and strategically identify and qualify companies for them that could potentially become acquisitions. So there are many synergies and mutual reinforcement with our partner, definitely a solid platform for much more growth in the U.S.
M.A.: What are some of the regulatory issues that inbound deals pose here in the US?
J.B.: In the life sciences and health care field in general, the FDA is clearly the major reference for anyone, whether American or new entrant. In manufacturing, but also other sectors, regulatory differences among 50 States are often unexpected for European entrants who thought they were approaching one homogeneous market. For example a company whose business is strongly dependent on Environmental, Health & Safety regulations, realized that it has to adjust to totally different regulatory landscapes. They must deal with EPA and OSHA regulations not only at the Federal level, but also their equivalents across 50 different states, many of them with internal heterogeneity from county to county, and sometimes from city to city. As one CEO put it, "some of these internal US differences are wider than regulatory differences between Sweden and China."
M.A.: What type of access to research here in the US is integral to your portfolio companies? (If any?)
J.B.: Some portfolio companies address niche markets that are poorly covered even in the US. Seen from the outside they look impenetrable or definitely misunderstood. The only research available can be difficult to find, or offered at such a high price that we end up performing our own research. It is interesting how some pockets of the US industry are only known to those inside the industry; very little is published about them. When we uncover them, we discover an entire world with its industry players, major changes and many opportunities for anyone interested in the middle market. Looking at these markets with a pair of new eyes � those of a foreign new entrant – is an exciting experience, and we often get a positive reaction from US counterparts.
M.A.: What types of legal issues have you faced putting together cross-border deals (both here in the US and the EU)?
J.B.: These are not necessarily issues we have faced, but engaging in cross-border deals definitely raises concerns regarding employment law and legal issues related to human resources in general. While some US companies have employment law apprehension regarding European deals, European companies have equally high concerns regarding other types of legal issues in the field of human resources in the US. More generally, fundamental differences between the Common Law vs. Civil Law legal systems have almost infinite ramifications.
M.A.: What are some of the exposure issues EU companies face here in the US?
J.B.: Legal issues, of course, but also market-related issues ranging from competitive landscape to post-deal management issues, and many others. European executives are sometimes totally oblivious to issues that are considered as obvious here in the US. They don't realize how dramatically such differences may affect their business models and projections. For example, what appears to them as a relatively minor issue to be ironed out by the company's lawyers might be considered here as a deal breaker. But the same is true for US executives regarding European exposure issues. However, sometimes EU companies' perception of risk exposure is inflated and leads to hesitation regarding the US market, which leaves large opportunities on the table. Others have tried, failed and never came back. Many European business people and investors interpret these failures as victims of "risk exposure" issues, whereas they reflect poor management decisions and execution instead. Many deals could happen and lead to successful businesses with better control of risk exposure through more thoughtful market entry strategy and deal making decisions, execution and post-deal management.
M.A.: How do you compare the deal process here in the US to the EU (from funding to exit)?
J.B.: This is not a statistically significant statement, but based on our observation and those of others, the process definitely seems much faster in the US. The diligence process, however, may be much heavier here in the US and especially from the legal standpoint. In some countries and industries, political, social, administrative, cultural and, sometimes, personal networks considerations have much heavier influence on a deal process � whether in favor of or as a hindrance to the process. From a US standpoint, the European deal making mechanics may appear much less transparent and challenging to penetrate. The reverse is not as frequent.
The deals that lead to the most successful and viable market entry strategies are those that follow a sufficiently long process of market observation and organizational learning process and take well calculated tactical steps that are part of a larger and longer term plan. These types of deals can lead at some point to one major breakthrough, such as a large acquisition or investment. There are probably many counter-examples though, with successful strategies with large upfront deals, but our observation is that they remain exceptions rather than the rule. The opposite is not true either, though. Deals fraught with lengthy and timid processes that are under-budgeted and poorly managed by expatriates who are not deeply rooted in the market rarely lead to something significant. But their failures often get blamed on some other reason. I don't think the management teams or their board members like the idea that they are the real reason for lack of successful cross-border deal making and expansion of their companies.
M.A.: Thanks Jabril.
For more on The Triana Group and its portfolio companies see here.
