Emerging markets can offer good returns for investors but these come with increased risk. How can investors and lenders ensure they are making fully informed investment decisions and have in place commensurate protection?
We have seen how emerging market risks have resulted in large scale restructurings and corporate collapses in Asian and other emerging markets.
By recognizing the warning signs and red flags during due diligence, we can readily establish whether there are rational explanations for them or whether investors should beware.
Different transaction and security structures can result in very different outcomes for investors and lenders when investments do not go to plan.
When assessing investment opportunities, thorough due diligence, tailored to address the nuances of emerging markets, will enable investors and lenders to appraise any investment and maximise returns. Designing and implementing an effective investment structure is critical for emerging markets investments.
Some of the common issues encountered when doing business in emerging markets include:
- Incomplete or inadequate information – lack of available, accurate and/or complete information or management reporting
- Audit limitations – ineffective audits resulting in material misstatements in reported earnings and/or asset values
- Fraud – management or the promoter intentionally misleading investors and/or siphoning assets/cash out of the business
- Weak legislative regimes – difficulty in presenting a credible legal threat to rogue management or shareholders, or deriving recoveries through the courts or enforcement
Borrelli Walsh has extensive experience in stressed and distressed situations, acting for lenders, investors and companies to assess these situations, the options available and our recommendations for the optimal outcome in the circumstances.
As an independent restructuring firm, we are intimately aware of the risks of doing business in emerging markets. Every year, we undertake billions of dollars of restructurings and other transactions. This experience provides us with unique skills and insights from which we are able to tailor our due diligence services and solutions. We advise investors and lenders on the merits and risks relating to potential investments and how to structure the investment to safeguard against potential risks.
This summary describes the difficulties encountered by capital providers in emerging markets and the due diligence approach that Borrelli Walsh adopts to establish and minimise the associated risks.
|Challenge||Issue||Due diligence approach|
|1. Management information is often incomplete, inaccurate or insufficient||
|2. Audit limitations||
|4. Weak legislative regimes||
The Borrelli Walsh team has significant experience providing clients with due diligence services in emerging markets spanning various industries, as well as ongoing monitoring and directorship services. We would be happy to discuss how our approach has assisted our clients in evaluating potential investments.
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