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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

For many foreign companies evaluating U.S. expansion, acquisition presents an attractive promise: speed. Buying an existing U.S. business can provide immediate revenue, established customer relationships, regulatory approvals and a functioning workforce. Compared to building operations from the ground up, it appears to compress years of development into months.

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But acquisition is not simply faster expansion — it is a different risk profile.

The core question is not “Is buying quicker?” Instead, it is:

Is acquisition aligned with our risk tolerance, governance model, workforce continuity and long-term capital strategy?

Consider a Canadian industrial manufacturer seeking entry into the U.S. market. It can either acquire an established U.S. distributor or form a new U.S. subsidiary and build deliberately over time. The acquisition path offers speed and immediate operational capacity; the greenfield path offers control and intentional design. Each carries distinct risks that must be evaluated before committing capital.

When Buying Makes Strategic Sense — and When It Does Not

Acquisition is often compelling when speed to market is critical, when regulatory approvals are difficult to obtain independently or when specialized workforce talent would be hard to recruit organically. In some industries, acquiring a competitor or distributor may also prevent market share erosion.

One of the first structural decisions in any U.S. acquisition is whether the transaction will be structured as an asset purchase or an equity purchase. In an asset acquisition, the buyer selects specific assets to acquire and identifies which liabilities it will assume, allowing the buyer to leave behind certain historical obligations of the target business.

In an equity acquisition, by contrast, the buyer purchases the ownership interests of the target entity and thereby inherits the operating company, including its contracts, licenses and liabilities. While foreign buyers frequently prefer asset transactions for liability management, sellers often favor equity deals because they provide a cleaner exit and reduce the need to obtain third-party consents for contract assignments. The structure ultimately selected can materially affect risk allocation, regulatory approvals and post-closing complexity.

Alternatively, some companies pursue greenfield expansion — establishing a new U.S. operation from the ground up. This approach allows the foreign parent to design governance systems, compliance controls and cultural alignment from inception. For companies operating in industries with significant litigation exposure or regulatory scrutiny, this control can be valuable. The choice is not about optimism — it is about whether the organization is prepared to inherit and integrate operational history.

Successor Liability: The Risk Buyers Often Underestimate

One of the most misunderstood aspects of U.S. acquisitions is successor liability. Even in asset purchases where a buyer intends to avoid assuming historical obligations, U.S. courts may impose liability if the acquired business continues operating in substantially the same manner.

If our Canadian manufacturer acquires a U.S. distributor, retains its employees and continues operating from the same facilities under the same trade name, it may inherit exposure related to wage claims, tax obligations, environmental liabilities or pending litigation.

We routinely see foreign buyers assume that structuring a transaction as an asset purchase eliminates inherited exposure, only to discover that operational continuity — retaining workforce, facilities and customer relationships — can still trigger successor liability. The distinction between legal form and operational reality is critical in U.S. courts.

The question executives must ask is not whether risk exists — it always does — but whether the transaction structure accounts for that risk through pricing, indemnities, insurance and integration planning.

In U.S. transactions, these risks are typically addressed through detailed representations and warranties in the purchase agreement. Sellers are asked to affirm the accuracy of financial statements, the absence of undisclosed liabilities, compliance with applicable laws and the status of key contracts, intellectual property and employment matters. If those representations prove inaccurate, indemnification provisions determine whether, and how, the buyer may recover losses after closing.

Some transactions may include escrow arrangements or holdbacks from the purchase price to secure these obligations. For foreign buyers unfamiliar with U.S. market practice, the negotiation of representations, indemnities and survival periods often becomes one of the most consequential aspects of the transaction.

Regulatory Diligence Beyond Financial Review

Financial performance rarely reveals compliance exposure. In the U.S., regulatory enforcement can be aggressive, and compliance failures can result in significant penalties.

Due diligence must therefore extend beyond financial statements to include employment practices, environmental compliance, occupational safety records, industry-specific licensing and tax registration across multiple states. In certain sectors, foreign acquisitions may also trigger review by the Committee on Foreign Investment in the United States (CFIUS), which can materially affect transaction timing.

Furthermore, depending on the size of the transaction, acquisitions may also require filing notifications to U.S. antitrust regulators. These filings require the parties to submit information regarding the transaction and observe a statutory waiting period before closing can occur. While many middle-market transactions fall below the filing thresholds, deals exceeding them may experience regulatory review periods that extend transaction timelines and require additional disclosures.

Even when federal regulatory requirements are addressed in cross-border transactions, compliance gaps often surface not in federal filings, but in state-level employment classifications, tax registrations and operational permits — issues that can be invisible to buyers unfamiliar with the U.S. regulatory environment.

The executive test is straightforward: if a regulator audited the acquired company immediately after closing, would the new parent be comfortable defending its compliance posture?

Workforce and Immigration: Where Structural Changes Can Disrupt Operations

Immigration due diligence is frequently overlooked in cross-border transactions, yet transaction structures can materially affect workforce continuity.

In the United States, many key employees — including executives, managers, engineers and specialized staff — may work under employment-based visa classifications. These visas are often tied to specific ownership structures or qualifying corporate relationships.

To illustrate, assume a U.S. distributor is majority-owned by German nationals and several critical German managers are working in the United States in E-2 treaty investor status. E-2 eligibility requires that the employees share the same nationality as the treaty investor owners.

Now assume a Canadian manufacturer acquires the distributor. Following closing, the U.S. entity is no longer majority-owned by German nationals, but instead by a Canadian parent. Because the E-2 employees no longer share the nationality of the new owners, the company no longer satisfies the treaty nationality requirement.

As a result, those E-2 employees may immediately lose work authorization in the United States. Unless alternative visa strategies are implemented before closing, key personnel could fall out of status, creating immediate operational disruption.

We frequently encounter situations where immigration implications are discovered late in the transaction process, forcing emergency filings or temporary operational pauses. When immigration planning is integrated into transaction diligence early, these disruptions are avoidable.

Similarly, if the foreign buyer intends to transfer its own executives into the acquired U.S. entity under the L-1 intracompany transferee category, the post-closing ownership and control structure must preserve the qualifying corporate relationship required for eligibility. A transaction that inadvertently alters control or ownership percentages may disrupt that eligibility.

Immigration compliance is therefore not a technical afterthought. It is continuity planning. Workforce disruption after closing can delay integration, stall revenue generation and undermine deal value.

Executives should ensure that immigration diligence addresses not only current visa holders but also anticipated mobility needs post-closing. Immigration eligibility, workforce continuity, governance authority and capital structure are not separate silos. In U.S. expansion, they are interdependent variables. Structuring decisions in one domain frequently shape outcomes in the others.

Governance and Cultural Integration

Acquisition does not automatically create alignment. Cross-border transactions frequently encounter friction in decision-making authority, reporting transparency and performance expectations.

In our experience, integration friction rarely stems from bad intent. It more often arises from undefined authority boundaries that were not clarified before closing.

A U.S. management team may expect greater autonomy than the foreign parent is accustomed to granting. Compensation structures, compliance expectations and escalation protocols may differ significantly.

Typically, to manage operational continuity after closing, many acquisition agreements include transition services arrangements under which the seller continues to provide certain administrative functions for a defined period after the transaction closes. These arrangements allow the buyer to integrate the acquired business into its own systems gradually rather than attempting immediate operational separation. In cross-border transactions, transition services can be particularly valuable where the foreign parent does not yet have U.S. administrative infrastructure in place.

To mitigate these risks, the buyer should define governance authority, reporting lines and integration timelines before closing. Without defined accountability, operational fragmentation can undermine the strategic rationale for the transaction.

Capital Structure and Long-Term Flexibility

Acquisition reshapes capital structure. Debt assumptions, earn-out provisions, minority shareholder rights and working capital requirements can preserve flexibility. To preserve that flexibility, many U.S. acquisitions include post-closing financial adjustment mechanisms designed to ensure the buyer receives the business in the expected financial condition. Working capital adjustments, for example, compare the company’s working capital at closing to an agreed target level and adjust the purchase price accordingly.

Some transactions also include earn-out provisions that tie a portion of the purchase price to the future performance of the acquired business. While these mechanisms can help bridge valuation gaps and keep transactions on schedule, they may also introduce potential post-closing disputes if financial metrics or operational responsibilities are not clearly defined.

Beyond these structural mechanics, buyers who approach acquisition solely as a market entry event often overlook that it is simultaneously a financing decision, a governance decision and an exit-planning decision. The transaction structure chosen at entry frequently determines future optionality.

Executives should evaluate whether the transaction preserves the ability to admit future investors, restructure operations or divest business lines. A deal structured purely for speed may constrain future capital strategy.

Well-structured acquisitions align ownership, governance, workforce planning, regulatory compliance and exit strategy from the outset.

A Question for the Board

Before approving a U.S. acquisition, boards should be able to answer:

How does this structure preserve executive mobility?

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What inherited liabilities remain even after indemnities?

Does this capital structure constrain future growth?

What will integration look like on day 90?

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If those answers are unclear, additional structuring analysis before closing may materially reduce long-term risk.

Acquisition accelerates entry and delivers immediate infrastructure and revenue continuity, while greenfield expansion allows for deliberate design and reduced inherited exposure. Neither approach is inherently superior. The appropriate model depends on industry dynamics, growth objectives, capital strategy and integration capacity.

What is clear is this: acquiring a U.S. business accelerates market entry — but it amplifies risk if poorly structured. Speed compresses evaluation and magnifies inherited exposure. Discipline mitigates it.

Foreign companies that treat acquisition as a strategic engineering exercise rather than a shortcut are far more likely to achieve durable success in the U.S. market. In our experience, the difference between a fast acquisition and a durable one is rarely the headline valuation — it is the structural discipline applied before closing.

This article is part of The U.S. Expansion Playbook, a series designed to help foreign companies enter and grow in the United States with clarity and confidence. Each installment addresses critical stages of U.S. market entry — from structure and incentives to workforce strategy, regulatory exposure and long-term risk management.

Warner’s International Business &amp; Trade team works across corporate, tax, regulatory, intellectual property, litigation and immigration disciplines to help foreign companies navigate U.S. expansion strategically and sustainably.

Associate

Mohamad “Mo” Knio

Lauren N. Moine

Partner

Sarah R. Bileti

International Business and Trade

The U.S. Expansion Playbook: M&A as a Market Entry Strategy — Buying vs. Building in the U.S.

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The U.S. Expansion Playbook: M&A as a Market Entry Strategy — Buying vs. Building in the U.S.

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