Understanding and managing the risks

“Less successful companies tend to under-invest in doing deals in growth economies and smaller companies find it difficult to build a deal infrastructure. But due diligence will be imperfect and valuations are high, so a strong strategic rationale is critical to completing a deal".

"Developing a rationale is hard, and takes time: 1-2 years in our experience. You may need to do considerable primary research to build up data, and there is a need to educate shareholders, because Board members and shareholders often hold pre-conceived concerns about growth economies.

“Although there are themes across markets, each market is different. This is one reason local capabilities are critical.”

“With a requirement for increased investment in individual markets, there is a case for prioritising markets. Focusing scare resources on fewer markets increases the chances of building scale positions that can support future growth. An effective way to do this is to use a ‘platform strategy’, making a large initial acquisition to enter a new market, and then bolting on smaller acquisitions.”

“Being on the ground gives stakeholders context to address their concerns. It makes it easier to identify a target short-list to improve the chances of choosing the right partner and gives visibility of market potential to help with valuations. Engaging with multiple levels of government increases the chances of obtaining approval and can help understand potential future changes in the government’s position”

Key people measures for success in growth market deals

“There is too much ground to cover; competition from rival bidders can be strong and appear irrational; sellers’ expectations are different; and there is too much uncertainty over future performance. Past deals show that there are a number of best practice measures and tips to manage individual risks in growth markets.”