Are international PE deals finally gaining ground? According to some reports, the forecast for 2025 seems cautiously optimistic.
“After two years of murky conditions, private equity started to emerge from the fog in 2024,” says McKinsey & Company’s Global Private Markets Report 2025. “Global PE dealmaking rebounded significantly in 2024 after two years of decline, rising by 14 percent to $2 trillion…Nowhere was the overall rebound more evident than in large buyout transactions in North America and Europe. Deals above $500 million in enterprise value rose in both value (37 percent) and count (3 percent), reflecting the increase in average deal size.”
As private equity investment opportunities pick up at home and abroad, investors need the right tools in their corner to help navigate this risky business.
A virtual data room is a must-have tool for all PE investors. How do VDRs fit into the PE workflow? How can virtual data rooms (VDRs) successfully reduce the risk of overseas PE transactions? First, what are the risks of international private equity deals?
Private equity transactions are inherently risky. Adding an international element further increases the risk of these famously precarious deals. However, the potential for a lucrative ROI keeps investors in pursuit of the next best PE venture.
Hitting recent headlines is famed fashion giant, Prada’s consideration of purchasing fellow fashion line, Versace. “Italian luxury group Prada (1913.F), has been given access, ahead of any other potential suitors, to the financial data of smaller rival Versace which owner Capri Holdings (CPRI.N), has put up for sale,” reports Reuters, noting that Prada has been given a month to crunch the numbers. “The brand’s [Versace’s] performance and the sector’s bleak outlook could make it hard to set a price, complicating negotiations, according to industry sources, who said a turnaround would require investment.”
This potential PE-facilitated purchase well illustrates the fine line between risk and reward that investors must weigh when considering a potential deal. Investors dealing in the millions – even billions – know that each deal is unique and requires painstaking analysis to discern if fronting the capital could yield a worthwhile return.
Here are 5 of the biggest risks of international PE deals:
1. Lack of Due Diligence
Responsibly made international PE deals are prefaced by an extensive due diligence process on both sides. Investors must essentially audit every aspect of the target company, including finances, corporate governance, regulatory compliance, operational procedures, legal liabilities, market share, competitors, assets, consumer alignment, taxes, and so much more.
Investors who lack the tools or attention to detail to perform this type of deep dive risk failing to uncover hidden red flags and may commit to an unprofitable deal.
Don’t miss: Why Due Diligence is Essential for Private Equity Success
2. Deal-Breaking Communication Barriers
Making international deals is more nuanced than domestic deals because of the added layer of communication challenges. Even if all parties are fluent in the same language, it is often difficult to communicate effectively. Cultural contrasts, time zone differences, and other communication barriers can further complicate a deal.
Going ahead with a deal without certainty that all parties are on the same page is very risky. Investors must find tools and strategies for promoting effective communication, including prioritizing transparency and collaboration and determining corporate compatibility.
3. Costly Data Breaches
International PE deal analysis requires analyzing large volumes of sensitive financial and company data. This confidential information must be shared securely and in compliance with all relevant regulatory requirements. A single data breach can expose a company to financially-crippling fallout, including reputational damage and even criminal penalties.
Investors need next-level tools for maximum data security and risk mitigation.
4. Regulatory Compliance Oversights
International deals are more complex because investors must have a thorough understanding of the legalities governing business in the target company’s country and any additional countries in which the company operates. Failure to comply with country and industry-specific regulations can result in severe financial and legal consequences. PE investors must take an organized and proactive approach to regulatory compliance.
5. Insufficient Strategy
Before making a deal, PE investors need a comprehensive strategy detailing how they will turn a profit, including an exit strategy. Failure to create a realistic and actionable plan can spell disaster. Investors need the right tools in their repertoire to develop and implement a plan that results in the highest return.
Let’s zoom in on how VDR technology effectively mitigates these risks.
How Virtual Data Rooms Mitigate International PE Transactions
Virtual data rooms are now a gold standard for navigating international private equity transactions. This invaluable innovation helps investors mitigate risks and close with confidence.
Here are 5 ways virtual data rooms help reduce risk in international PE deals:
- Facilitating due diligence – VDRs provide PE investors a platform for organizing and analyzing the mass volumes of deal-specific data needed to make a decision. This organized approach helps ensure no due diligence matters fall through the cracks.
- Promoting communication – VDRs give all parties to a deal a safe space to collaborate, backed by transparency-enhancing features like activity trackers, custom Q&As and instant messaging, helping everyone stay on the same page and keep the deal moving forward.
- Maximizing security – VDRs use advanced encryption to offer top security, safeguarding sensitive data from costly breaches and providing a means for secure document sharing.
- Boosting regulatory compliance – VDRs help PE investors organize their regulatory compliance procedures and maintain audit-ready documentation.
- Streamlining strategy – VDRs equip PE investors with the tools they need to create and follow through on a high ROI-yielding strategy, from due diligence to exit.
Meet CapLinked. We’re a VDR provider with top-tier tools to help PE investors reach all the above objectives.
Recommended read: VDR Features Checklist for Private Equity: Buy-Side and Sell-Side
Enterprise-Level VDR for International Private Equity Deals
CapLinked’s virtual data room is an end-to-end solution for better deal-making. Our VDR goes beyond simply mitigating risks, providing investors the tools they need to speed up deal analysis – filtering out the money pits and closing on the golden opportunities.
Our platform is used by big banks like Citi and Bank of America and at a fraction of the cost of other VDR services. CapLinked’s VDR is an investment that will quickly pay for itself by helping you discover more efficient workflows and elevating the deal-making process. Let’s team up.
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