New Managing Risk in Emerging Markets PE Transactions · 2017. 9. 1. · • The MENA Region: An...

Managing Risk in Emerging Markets PE Transactions An EMPEA Professional Development Webcast, 29 November 2011

Managing Risk in Emerging Markets PE Transactions

An EMPEA Professional Development Webcast


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EMPEA Upcoming Events

Save the Dates! • 17 January 2012: EMPEA Professional Development Webcast: Investment Spotlight – Emerging Europe

with Alpha Associates, EBRD, Pinebridge Investments and White & Case LLP (registration now open!)

• 1 February 2012: Private Equity in Southern Africa 2012 hosted by EMPEA, South African Venture Capital

and Private Equity Association (SAVCA) and FT Business – Johannesburg

• Qualified institutional investors receive complimentary event registration/LP Masterclass on January

31st

• SAVCA/EMPEA Members-Only Reception on January 31st

• 28 February 2012: EMPEA Professional Development Webcast: Investment Spotlight – Mexico

(registration now open!)

• 14-16 May 2012: IFC’s 14th Annual Global Private Equity Conference in association with EMPEA –

Washington, DC

• May 14th: Second Annual Institutional Investors-Only Summit

• May 15th – 16th: Main conference program

• Qualified institutional investors receive complimentary registration


Today’s moderator

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Philip Bass Global Markets Leader, Private Equity Ernst & Young


Today’s agenda

The case for emerging markets (EMs)

Potential risks of transacting and operating in EMs

Managing risks

Leading practices for transacting in EMs

Outlook

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Today’s panelists

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Alvaro Gonçalves Managing Partner Stratus Group Demet Ozdemir Private Equity Leader, Turkey Ernst & Young Bob Partridge Private Equity Leader, Greater China Ernst & Young

Arpinder Singh Fraud Investigation & Dispute Services Leader Ernst & Young India Pvt., Ltd. Greg Wolski Partner, Fraud Investigation & Dispute Services Ernst & Young LLP


Opinion check

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What is the average size of your typical investment (equity check)? A. US$10m – US$49m

B. US$50m – US$99m

C. US$100m – US$249m

D. US$250m – US$499m

E. Greater than US$500m

F. Not applicable


Today’s agenda



Managing risks


Outlook

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Importance of EMs is underscored by underlying GDP growth

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2011 Ernst & Young Rapid-Growth Markets (RGMs) Forecast– 25 RGMs’ real GDP growth 2000-10

Source: Ernst & Young and Oxford Economics


PE transaction activity in select markets

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EM PE investment totals by select markets, 2002–YTD 2011

Source: EMPEA. Data as of 30 September 2011. Published 15 November 2011. Data for Turkey only collected from 2008 onwards.

US

$m

0

5000

10000

15000

20000

25000

30000

35000

2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD 2011

Brazil China India Russia/CIS South Africa Turkey


Fundraising – Emerging Asia continues to attract greatest interest

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EM PE investment totals by region and value, 2008–YTD 2011

Source: EMPEA. Data as of 30 September 2011. Published 15 November 2011.

48% 60%

71% 61%

73%

25% 8%

7%

5%

7% 7%

10% 24%

18% 9% 10%

5% 6% 7% 12%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 YTD 2011

% o

f Tot

al V

alue

Emerging Asia CEE & CIS LatAm & Caribbean MENA Sub-Saharan Africa Multi-region


Growing interest from PE across most major EMs

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Source: Ernst & Young Private Equity Capital Confidence Barometer. November 2011


Today’s agenda



Managing risks


Outlook

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Types of risks

Management team

Internal controls and governance

Country/local customs and practices

Transaction

Pricing

Contract

Asset ownership

Legal and regulatory/compliance

US Foreign Corrupt Practices Act

UK Bribery Act

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Red flags

History of corruption in country or industry Family or business ties to local country government officials Related party transactions Multiple sets of books Request for unusually high commission or other payment Refusal to provide anti-bribery certification Large/frequent fourth quarter adjustments Lack of written agreement Request for payments to third countries or third parties Request for increase in compensation during sales campaign Request for payments in cash or bearer instrument Lack of experience or track record with product field or industry

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Today’s agenda



Managing risks


Outlook

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Types of transactions

Buyouts/control acquisitions

Minority interest

Minority interest with significant influence

Joint venture

Public private partnership

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Strategies to manage transaction risks

Understand local market and characteristics of businesses typical in the market

Ferret out potential issues early

Ask the right questions – to the right people

Include the right controls in purchase agreements

Right team/people/advisors

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Today’s agenda



Managing risks


Outlook

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Strategies for successful transactions in EMs

Establish a local presence early

Focus on core investment strengths (e.g., sector, investment type)

Ensure good governance model at portfolio company

Be actively involved in guiding management teams

Be prepared for longer and more thorough diligence

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Phases of FCPA due diligence

FCPA risk assessment

FCPA due diligence procedures

Development of post-closing compliance program

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Today’s agenda



Managing risks


Outlook

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Outlook

Beyond BRIC

Other considerations around EMs

Opportunities for portfolio companies

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Ernst & Young thought leadership Log onto: www.ey.com/privateequity

Facebook: Ernst & Young transactions 23


EMPEA Webcast Series

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Launched in 2008, EMPEA has hosted over 20 webcasts to date drawing more than 2,600 participants from 70 countries and more than 500 unique firms.

Webcast Topics have included: • Changing Landscape of EM PE Fund Formation

• The MENA Region: An Overview and Update

• The Impact of the AIFM Directive on PE and VC in Emerging Markets

• Private Equity in North Africa: What Every LP Must Know

• The Impact of the Dodd-Frank Act on Investment Adviser Regulation in the U.S.

• Private Equity Investing in the Middle East, North Africa and South Asia

• Evolving Key Terms & Conditions in Today’s EM PE

• Managing Environmental and Social Risks and Opportunities

• How Will the ILPA Principles Shape GP-LP Relationships in Emerging Markets?

• Catching the Rising Tide of Chinese RMB Funds

• Strategies to Address and Prevent LP Defaults

• Broken BRICs (a four-part series)

• Role of the Secondaries Industry in Emerging Markets Private Equity

• Corporate Governance in Emerging Markets Private Equity

• Marketing Your Fund to LPs in Today’s Market Conditions

• Risk Management in Emerging Markets Private Equity

• Recruiting and Talent Management in Emerging Markets Private Equity


EMPEA Contact Information

For follow-up questions on this or other webcasts, please contact Shannon Stroud at [email protected] or +1.202.333.8171. Please also visit www.empea.net for further information.

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New Managing Risk in Emerging Markets PE Transactions · 2017. 9. 1. · • The MENA Region: An...

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