The local partner selected during the first months of a market entry can materially influence the pace and cost of execution. A good distributor or agent shortens the first year; a bad one can slow progress and lead to costly disputes. The checks below take a few weeks and are worth every one of them.
Reference Calls, and Who to Call
The partner will offer references, and they will be good. The useful calls are the ones the partner does not offer: the customers it serves for other suppliers or clients, and the commercial partners it has parted with. Ask each the same two questions: what the partner is good at, and what happened at the end of a relationship. The second answer says more about how the relationship will end than anything in the pitch.
Corporate, Regulatory and Litigation Checks
Many markets provide public company, regulatory or court records, although their availability and cost vary by jurisdiction. Corporate records may help confirm an entity's legal status and directors, and in some jurisdictions its ownership. Regulatory records may assist in verifying relevant authorizations. Where records are available, litigation searches can identify potentially relevant disputes, but should be interpreted with local legal advice and supplemented by other diligence. If the prospective partner's account differs from independently available information, resolve the discrepancy before proceeding.
The Terms That Protect the Company
The agreement matters most on the day the relationship ends, so it is drafted with that day in mind. The agreement should be prepared or reviewed by local counsel. Common commercial issues to address include:
- Exclusivity: if the partner has it, tie it to minimum performance and review it annually
- Term and exit: a fixed term with a notice period, and the right to end for non-performance
- Customers and data: the customer relationships and the data belong to the company, and the agreement says how they transfer on exit
- Confidential information and post-termination restrictions, subject to local law and enforceability
Local counsel should prepare or review the agreement under local law, because a term that protects the company at home can be unenforceable in the new market.
The Check That Most Companies Skip
Meet the people who will do the work, as well as the owner who pitched. A partner is a team, and the sales manager who will carry the product is the person the company depends on. If the prospective partner cannot provide appropriate access to the people who would deliver the work, treat that as a diligence point to resolve before signing. Citalo Group runs these checks for companies entering a new market, and sits in the negotiations where the client wants it.
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