For many companies doing a deal is the best – or only – way of tapping into growth markets, largely because it is faster than going-it-alone. But deals in growth markets remain incredibly challenging. Our research suggests that over 50% of deals that enter detailed external due diligence in growth markets fail to complete. We believe this is materially higher than in developed markets.
For this study, PwC carried out an assessment of over 200 deals, and interviewed 20 senior deal makers who have bought businesses in growth markets to understand the root causes of problems, and how they overcame the challenges encountered.
While there are plenty of examples of successful deals in growth markets, that the deal makers we interviewed acknowledged that deals in growth markets are inherently riskier. There is a much bigger deviation, or range, of potential outcomes. We refer to this range as the delta, and in growth economies, the delta between a good deal and a bad one is much bigger. If things go well, investors stand to make a lot of money. But if things go badly, investors can lose significantly.
Growth markets are different, which is why our strongest recommendation is to build the local machinery needed to get a deal done well in advance of executing the first deal. This and other recommendations resulting will help companies to avoid doing bad deals, to successfully complete on good deals, and to make sure a good deal doesn’t turn bad after the deal trophy is on the shelf.
Watch John Dwyer & Alastair Rimmer discuss the key findings from the study with Chris Hemmings.
Integrity due diligence
Mark Anderson, a Partner in Forensic Services, discusses how businesses should develop a plan to mitigate integrity and & financial crime risk
The people challenge
There are many people challenges when it comes to doing deals in growth economies. Ann Elliot a Director in Human Resource Services, outlines what key things businesses need to consider
Simon Harris, a Director in Valuations, discusses how valuation sits at the heart of any deal, especially in growth economies where there my be more uncertainty
Foreign exchange & treasury
Foreign exchange volatility can have implications in certain deal situations, Carl Sharman a Director in Treasury Consulting discusses how