Merger with companies that operating in an emerging market
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Hi Guys,
Wonder if you have come across any deal that merge with a company that operates in emerging market?
I believe the DD process would take longer than other deals.
Share your thoughts.well, in my experience in the financial services industry in West and Central Africa deals do not have a longer due diligence phase:
1. Cash is scarce resource, so buyer is careful about the due diligence costs
2. The buyer does not want to invest too much before the signing given that the states usually have pre-emption right and that once announced a deal can never happen as the States decide to preemptIt depends of course on the market, but there usually are several areas which are different such as cultural differences, local regulations and controls, etc. Insight might also be available from local external advisers and DD providers.
In addition to the usual due diligence process, we encountered operational violations of local regulations that were not recognised by the seller nor the management team during the transaction. These issues came to light post-acquisition and required explanation, rectification, and payment of fines.
As such challenges are common in emerging markets, it is important to conduct deeper due diligence, particularly in compliance and local regulatory matters. Ensure that the acquisition agreement includes robust representations and warranties as well as indemnification clauses.In my opinion due diligence phase lasts the same about 4-8 weeks depending on the size of the entity if local advisors are hired.
However, given that usually emerging markets have different cultural, operational and regulatory practices, this usually prolongs SPA negotiation and integration phases of the M&A process.
Hi there!
I’ve definitely come across deals involving mergers with companies in emerging markets, and I think you’re spot-on about the due diligence (DD) process taking longer. These types of deals can get pretty complex due to factors that don’t always pop up in more established markets.
For instance, I remember a case where a European tech firm acquired a startup in Vietnam. The DD process ended up dragging on for an extra two months because of some unexpected challenges. Verifying ownership records was a headache—local legal systems didn’t make it as straightforward as you’d expect. Then there were the local labor laws and foreign investment regulations, which added more layers to dig through. It really drove home the point that in emerging markets, you often need to adapt your approach since the usual frameworks might not apply.
That said, the extra effort can be worth it. Emerging markets often have huge growth potential that’s just waiting to be tapped. A thorough DD process can help you dodge risks while uncovering some unique opportunities you wouldn’t find elsewhere.
Have you worked on any deals in emerging markets yourself? What challenges did you run into, and how did you handle them? Would love to hear your thoughts!
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