In co-operation with the Economist Intelligence Unit, we are pleased to publish M&A Beyond Borders: Opportunities and Risks, a thought-leadership report highlighting the survey results of 670 executives from multinationals around the world on the topic of cross-border mergers and acquisitions.

The report includes insights and advice from our most experienced M&A practitioners from around the globe on the key opportunities and risks facing organisations in today’s M&A environment. Their analysis of political risk and corruption, environmental liabilities, due diligence in emerging markets, workforces and other topical issues has been gained over the past 30 years through advising both corporations and private equity firms.

The collective Private Equity and Mergers & Acquisitions Practice at Marsh, Mercer and Kroll is a dedicated team providing risk advice and human capital solutions on transactions. We hope you find this report of value to the challenges you face as you pursue new deals and strive to realise maximum value from them. (Request your copy)

Report highlights

To complement the findings from the Economist Intelligence Unit’s survey, experienced M&A practitioners from Marsh, Mercer and Kroll have contributed their observations on the challenges and opportunities available to both strategic and financial deal makers. Their insights are organised in the finished report by geographic region.

Emerging market corporations are confident to do deals

Emerging market corporations are now more confident in their pursuit of M&A. Chinese, Indian and Russian companies have been prolific in venturing outside their domestic markets to do deals, demonstrating that they are well-managed, efficient and globally competitive. Many of them have recently had initial public offerings on stock exchanges – not so much to raise capital as to demonstrate greater transparency, dispel perceptions of reputational issues and effectively pave the way for future M&A deals.

Some geographic areas require careful analysis of political and security risks

Terrorism, political instability, corruption, kidnapping. All are issues that may need to be considered, as acquirers look to emerging markets for raw materials, low-cost manufacturing and new markets. The downside of these dangers is evident, yet uncertainty creates opportunities for those willing to take calculated risks in some areas of Africa, Latin America, the Middle East and parts of Asia and Eastern Europe. Partnering with trusted advisers on the ground can be the difference between success and failure.

Workforce issues vary substantially around the globe

How feasible is a post-deal workforce reduction? Are local employment regulations loose or tight? Can people be shifted to performance-based pay? Everyone knows about strict lay-off and employment rules in France, Germany and Italy, but acquirers seeking opportunities in parts of Latin America, Africa and the Middle East will find some of the same. Global deal makers need to understand the rules and industry practices.

Consideration of environmental issues must be reflected in the deal

Around the world, governments are making rapid and sometimes sweeping changes to environmental legislation. While the degree of environmental litigation and statutory enforcement in some countries still lags well behind North America and Europe, deal makers should be mindful of greater regulatory scrutiny of their operations, stricter enforcement of environmental legislation and the extent of environmental liabilities they may assume in a merger or acquisition.

Redefining due diligence as M&A goes global

Due diligence is, fundamentally, a risk management activity, yet in many markets risk and insurance reviews are excluded from a bidder’s due diligence. This can be a dangerous oversight, as deal makers may underestimate the liabilities and risks they inherit and overestimate the insurance assets of the target company. This is particularly true in crossborder acquisitions, where determining the true cost of risks requires a more forensic analysis and a solid grounding in the local risk management culture as opposed to a mere confirmatory review.

Insurance capital can be used to overcome deal-specific concerns

Investing in an unfamiliar country can make even the most straightforward venture seem risky, particularly when an acquirer is being asked to accept a level of warranty and indemnity (or representations and warranties) recourse from the seller that is significantly below the overall transaction price. Increasingly, deal makers are strengthening their negotiations by tapping into warranty and indemnity insurance to avert lengthy negotiations or even potentially deal-breaking situations.

People matter in every phase of the M&A process

Since almost 40% of corporate revenues are spent on people (salaries, benefits, hiring costs, etc.), deal makers must pay close attention to human capital issues in every phase of the M&A process – and the earlier the better. In Japan, for example, a deal that fails to demonstrate tangible benefits for target company employees, not just the acquirer’s shareholders, may not get off the ground. In China, wage inflation is becoming a serious problem for owners, and India is fast running short of technically trained people.