M&A in fast growing countries: Traps and structuring opportunities
In an era of worldwide competition and integrated markets, external growth is a major strategic response of many companies to a shifting and complex competitive environment.
Complexity in the emerging markets
While contemplating transactions in fast growing economies* presents attractive opportunities to many investors, the acquisition process as well as the integration process are more complex than when conducting deals in mature economies. Our Transaction Services and Tax optimization professionals in the 15 countries* covered by this study often encounter a number of risks threatening the success of the deal-making process in fast-growing markets or the success of the subsequent integration process. In this study, we shed light on transactional risks and opportunities based on our specialists’ experience from conducting due diligence and tax optimization in growing markets.
The main traps identified by our experts during the due diligence processes are related to
- the accuracy of the financial information,
- ownership and governance practices,
- regulatory and legal issues.
Tax optimization
The tax aspect of a deal cannot be neglected, the tax optimization not only requires identifying and avoiding various tax traps (such as thin capitalization rule) but also benefiting from several tax incentives such as tax treaties and the rules for amortization of assets. Our specialists emphasized the importance of engaging with multiple levels of control of the information provided, enlarging the scope of the due diligence to address the critical areas and conducting work on the ground with local experts and advisors.
*We took an extended approach to the notion of fast growing economies by including the five BRICS (Brazil, Russia, India, China and South Africa) and adding another ten promising and growing economies which may present attractive opportunities to investors (Algeria, Egypt, Indonesia, Malaysia, Mexico, Nigeria, Philippines, South Korea, Turkey and Vietnam).
