Cross-border transactions in emerging markets - Ernst & Young - Middle East

Cross-border transactions in emerging markets

Transaction professionals tell us that deals in emerging markets are at the forefront of their corporations' agenda. These transactions pose considerable challenges in both concept and execution. And, the strategic importance of emerging market transactions is not always matched by successful results. What can corporate development executives do to make emerging market deals more successful?

Our "Global transaction leaders study 2007," the third in a series on the evolving role of the CDO, analyzes the responses of 300 transaction leaders — across several functions of the corporate deal team — from 95 companies in 15 countries. Their perspectives and experience have enabled us to identify some key principles and practices to apply when doing business in emerging markets.

Key success factors for deals in emerging markets are identifiable at each stage of the transaction lifecycle:

• Strategic analysis: clarity of purpose drives success
  Results often disappoint because teams fail to align strategies with tactics
• Opportunity analysis: know the deals, build relationships with all stakeholders
  Local knowledge is essential to managing key emerging market business challenges
• Transaction development: what you don’t know will come back to hurt you
  Scarce information means redoubled due diligence is essential
• Negotiation and execution: the 'best' deal is the most workable deal
  Successful investors are sensitive to cultural difference, however unfamiliar
•  Transaction effectiveness: getting it right at the end means getting it right at the start
  Without a dedicated integration team, business plan synergies will likely not be achieved.

Progressive deal teams practice what we call "the five A's" of doing successful deals in emerging markets: Alignment of purpose, Alliances, Awareness, Adaptability, and Application of lessons learned. Together, the five A's increase the chances of success for a given deal.