Cross-border commercial due diligence in Europe

If you are going to invest in a company with international expansion plans, you want to make sure that their product or service has good chances of being successful in the countries where you have ambitions.

This of course is also important for Europe. Only with the right knowledge about demand, competition and regulations it is wise to invest in market entry.

Business opportunities in Europe

Europe is one of the largest and most diverse markets globally, comprising over 40 countries with varying economic conditions, consumer preferences, and regulatory frameworks. As the European Union (EU) forms the core of this market, it offers significant opportunities for businesses, but success requires careful planning and adaptation.

Key Market Numbers

Europe’s economic size and diversity make it a critical market for international businesses. Key statistics include:

Population: Approximately 750 million, with 447 million in the European Union (EU) (2023).
GDP per capita: Varies widely; Western Europe averages around $45,000 USD, while Eastern Europe may be significantly lower.
Urbanization: About 75% of Europeans live in urban areas, with cities like Berlin, Paris, Madrid, and Warsaw acting as key economic hubs.
Economic Structure: Services dominate, contributing 70–80% of GDP in most countries, followed by manufacturing and agriculture.
Ageing Population: Many European countries face ageing populations, particularly in Germany, Italy, and Spain, creating opportunities in healthcare, financial planning, and products for seniors.

Language and Documentation

Europe’s linguistic diversity and regulatory environment require careful consideration when entering the market.

Official Languages: Europe has over 200 languages, with key ones including English, French, German, Spanish, and Italian. English often serves as a lingua franca in business contexts.
Language Considerations: Localization is critical for success. Consumers expect product packaging, marketing, and customer service to be in their native language, particularly in non-English-speaking countries.
Packaging and Documentation: The EU has strict regulations regarding product labeling, safety, and environmental standards. Packaging often requires details like ingredients, origin, and recycling instructions in multiple languages.

Consumer and B2B Buying Behavior

Buying behavior in Europe varies significantly by country and region, influenced by cultural, economic, and technological factors.

Consumer Behavior: Western European consumers value quality, sustainability, and brand reputation. Online shopping accounts for about 15–20% of retail sales across Europe (2023), with significant variation by country. Northern Europe leads in digital adoption, while Southern and Eastern Europe are growing quickly.
B2B Buying Behavior: Relationship-building is crucial in Southern Europe (e.g., Spain and Italy), while Northern Europe (e.g., Germany and the Netherlands) prioritizes efficiency and ROI. Decision-making structures also differ, with some markets emphasizing consensus and others relying on hierarchical approval.
Online Presence: A localized digital presence is essential, including websites in local languages and activity on regionally popular platforms like Zalando, Cdiscount, or Allegro in addition to global platforms like Amazon.

Market Challenges and Opportunities

Europe’s diverse markets offer opportunities but also challenges due to regulatory complexity and cultural differences.

Products/Services that May Struggle: Products that fail to meet stringent EU safety, environmental, or quality standards may face barriers. Similarly, services requiring centralized operations may struggle due to language and cultural fragmentation.
Test Market Potential: The Netherlands and Denmark are often seen as ideal test markets due to their tech-savvy populations, open economies, and small but diverse demographics. Success in these countries can serve as a blueprint for broader European expansion.
Regulatory Environment: Compliance with EU standards is mandatory for most goods and services, but businesses must also navigate country-specific laws. Non-EU countries like the UK, Norway, and Switzerland have distinct rules that differ from the EU framework.

Comparing performance in existing markets

If the company the we are assessing already has sales in different countries, you can determine distributor performance or sales staff performance.

One do this by correcting the actual turnover with data about:

the buying power in the market;
the geographical reach of the distributor or sales team;
the competition intensity;
the number of years active in the market.

Combining the data of the various countries over time leads to a growth curve where overperformers and underperformers can be easily identified.

You can then do selective interviews what causes any underperformance, and you can take corrective measures.

A curve like this also helps to estimate the potential in a new market.

Before you focus only on Europe

Please note that there are many countries in the world and the biggest ones or the ones nearby are not automatically the best choice. It all depends of the market growth, the competition and the barriers for entry.

Therefore we would advise you to make a short-list of at least three, but preferably five potential new markets and compare them against the same criteria.