Clients Continue to Explore Global Expansion Opportunities

Clayton & McKervey

Many of our clients are continuing to explore expansion opportunities, and often that expansion is leading them to other countries. The specific reasons vary, but the general theme revolves around their need to create the infamous global footprint to meet the needs of their customer base. Without getting into all of the reasons folks are expanding outside of the borders of the US, I thought I would summarize and comment on some of the trends we are seeing in our client base.

Companies are still expanding into the US, and Michigan is gaining its fair share.

Over the last few years we have seen continued investment by foreign companies in Michigan. The vast majority of the companies are coming to expand their relationship with the automotive industry; however, we have seen continued investment in Michigan from medical device companies and companies involved in renewable energy as well. In the past, most of the investment has come from primarily Canada, Germany, France, the United Kingdom, and Japan. The investments made by these countries slowed down the last few years, but we are now seeing, and hearing, about a renewed interest in investing in the US by these countries. In addition, there has been added interest and investment from Italy, China, and Israel. With the economy slowing in Europe and the recently passed Right to Work legislation, we expect our region will continue to enjoy additional investment from outside our borders.

Expansion into Mexico

While we have clients looking at opportunities around the globe, I think it is fair to say most of the inquiries are about Mexico. This is clearly a direct reflection of the increased activity in the automotive industry and the growing awareness that Mexico is quickly becoming one of the world’s largest exporters of automobiles. We have seen not only automotive part production expansion in Mexico, but expansion in the construction and service industries as well.

Although the activity has dwindled, we still get a fair number of inquiries about China. Previously those inquiries were a direct result of our clients seeking a low cost of production country. This is now rarely the case. Instead, clients are seeking to establish operations so they can produce and sell in the market.

One country we expected to see more activity with was Brazil. Although we have some clients selling to Brazil, we are finding very few clients have the financial wherewithal to actually establish and operate there. No doubt Brazil could be a significant opportunity for many companies; however, we find our typical client (privately held, sales of $10 million to $100 million) is not of sufficient size to handle the administrative costs of establishing an operation in Brazil.

We have resources to help.

Because we focus our business on helping entrepreneurs do business globally, it is critical that we maintain relationships around the world to help them grow. We do this primarily through our membership in PKF International Limited, a network of legally independent member firms with representation in 125 countries. We are proud to say this is more than just a “rolodex” relationship. Members of our firm invest substantial time and effort in developing and maintaining these relationships. Some examples of how our shareholders maintain these relationships are:

• Tim Hilligoss, CPA, MST, Shareholder – International Accounting Services and Practice Leader for Asia, recently spoke at an International Business Development meeting on his experiences with China. PKF International members from Europe and Mexico were in attendance. Tim, and International Tax and Accounting Consultant, Julia Qi, will be traveling to China in late spring to meet with Chinese companies setting up US subsidiaries.
• Sue Tuson, CPA, MST, Shareholder – International Tax Services, recently attended the PKF International Tax Symposium in Cyprus where she meet with PKF International tax practitioners from around the world.
• Rob Dutkiewicz, CPA, MST, Shareholder – International Accounting Services and Practice Leader for Europe, visited clients in Europe this December and used the opportunity to visit with PKF International member firms in Germany and Italy. Rob will be returning to Germany and Italy this summer.
• Tim Finerty, CPA, Shareholder – International Assurance Services and Practice Leader for Mexico and Latin America, recently returned from Automation Alley’s Mission Trip to Mexico to establish connections for US companies expanding to Mexico.
• Kevin McKervey, CPA, President, recently visited Brazil for the PKF International Symposium. While there he not only met with clients, but also with our PKF International member firm in Sao Paolo.

In addition, we stay in contact with attorneys, bankers, and economic development folks that are involved in growing international business in our region.