- Challenges, risks and opportunities in emerging markets - Partnering with local players and joint venture issues - Protecting the investment: due diligence and other strategies David Avery-Gee, Partner, Linklaters

1. Acquisition Trends in Emerging Markets
19 November 2014
Presented by: David Avery-Gee and Nick Edwards

2. General trends
•Increased number of transactions
•Increasing number of JVs –reflects challenging business environment
•Clients expanding global reach/coverage
•Improving access to developing markets
•Changing regulatory landscape
•Increasing number of transactions and instances of arbitration

3. Challenges and risks
•Cultural challenges
•Learning to live with bureaucracy
•Language and approach
•New legal systems
•Infrastructure and personnel issues
•Negotiations are an ongoing activity
•Political risk
•Exposure to government at every level
•Growing trend –“resource nationalism”

4. Why JVs rather than acquisitions?
•Local laws/jurisdictions may restrict acquisitions
•Availability of funding in current market conditions
•Test the market before an acquisition
•Learn culture from local partner before full expansion
•Political protection –benefit from local partner’s influence and contacts

5. Strategy?
•Limitations of “traditional” M&A risk management processes
•No “one size fits all”
•A multi-layeredapproach
•Diligence at the outset
•Contractual protection
•Post-investment risk mitigation / engagement
•Arbitration

6. Diligence
•Structuring
•Bi-lateral investment treaties
•Offshore structures
•Understand your JV partner
•Careful selection
•Consider reputational issues
•Mitigate risk of falling out of favour
•Understand the politics/relations with the government
•Find strong local lawyers

7. Contractual/legal protection
•Stabilisation clauses
•Local law diligence on legality of stabilisation clauses
•Consider alternatives to traditional approach –e.g. more specific change in law liquidated damage clauses
•Broad waivers of sovereign immunity against jurisdiction, enforcement and interim relief and injunction
•Credible package (e.g. warranties)
•Butrecognise the limitations –the best contract may not help you but a bad one may hurt you

8. Risk mitigation
•Perception issue –disadvantages of not being local
•Maintain an open and transparent relationship with governments/local regulators
•Consider PR aspect
•Understand the press
•Make friends
•Sound corporate social responsibility strategy
•Do not underestimate level of commitment required

9. Arbitration
•The Court system
•Use of arbitration clauses
•Quest for neutrality, expertise and flexibility
•Leverage in negotiations
•Dangers associated with arbitration
•Enforcement issues
•Impact on government relations
•Seek advice from arbitration specialists

10. Surge in investment arbitration
0
100
200
300
400
500
600
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Cumulative number of cases

11. David Avery-GeePartner, CorporateLinklaters LLP, London
Tel: +44 (0) 207 456 2144 Mob: +44 (0) 7798 830 350 david.avery-gee@linklaters.com http://www.linklaters.com
Nick EdwardsManaging Associate, Corporate LinklatersLLP, London
Tel:+44 (0) 207 456 5842 Mob: +44 (0) 7825 892 953 nicholas.edwards@linklaters.com http://www.linklaters.com