More than a quarter of cross-border M&A deals in emerging and developing markets are hit by a range of major setbacks such as regulatory investigations or government opposition, according to research by law firm Freshfields Bruckhaus Deringer.The firm analysed 132 cross-border transactions valued at £500 million or more in growth markets over the last five years and found that the higher the stakes, the greater chance of a problem. One in three deals worth over $2 billion dollars encountered an issue with regulatory probes the most common for one in two deals.
The research also found that one in three (35 per cent) were impacted by litigation setbacks whilst activist protests and landowner and employee disputes impacted on 22 per cent of difficult deals.
Riskier deals
Global head of corporate, Edward Braham pointed to more scrutiny from regulators around the world who ‘have increasingly been flexing their muscles, especially since the global financial crisis.’ The firm pointed to a number of deals which experienced problems. Kazakh miner Eurasian Natural Resources Corp became embroiled in a dispute after the Congolese government seized the Kolwezie project from a rival company, First Quantum Minerals, and sold it for $20m to an associate of the president. After ENRC bought the mining rights for $175m, First Quantum sued, claiming they were "stolen assets". ENRC settled with First Quantum Minerals for approximately $1.25bn to end the dispute.
Meanwhile Vodafone ran into trouble when it acquired Ghana Telecom in 2008. Dismissed Ghana Telecoms workers filed a writ of summons against Vodafone Ghana over termination of their appointments, the UK’s Serious Fraud Office asked officials to investigate allegations of irregularities in Vodafone’s African dealings, activists staged a protest and the deal faced heavy government opposition.
Commenting on the findings, global head of corporate, Edward Braham pointed to more scrutiny from regulators around the world who ‘have increasingly been flexing their muscles, especially since the global financial crisis.’
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