Jimmy E Dadrewalla, European Finance Director at United Phosphorus - Corporate acquisition in different countries: How to successfully expand your global footprint
This presentation discusses corporate acquisitions in developing countries and managing associated risks and cultural issues. It notes that foreign direct investment has increasingly focused on developing markets in recent decades as opportunities for growth. When acquiring companies in new markets like Ukraine and Brazil, chief financial officers must focus on risk mitigation strategies, such as ensuring credible local partners and structuring deals to allow resolution of disputes in international courts. The presentation also emphasizes the importance of understanding cultural differences between countries and integrating acquired company employees and leadership to avoid potential clashes. It provides a case study on the challenges of establishing a joint venture in Brazil, including differing growth aspirations of partners and approaches to debt levels.
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Find out more at http://www.oecd.org/daf/inv/investment-policy/seasia.htm - http://www.oecd.org/daf/inv/mne/pfi.htm - http://www.oecd.org/globalrelations/seaforum.htm
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Read more at: http://www.oecd.org/investment/fdiindex.htm
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To find out more visit: http://www.oecd.org/daf/inv/investment-policy/2014-asean-oecd-investment-policy-conference.htm
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Stephen Thomsen looks at investment climate reform in Southeast Asia and draws lessons for the update of the OECD Policy Framework for Investment currently underway. This presentation was made at the Southeast Asia Regional Forum in Bali, Indonesia, on 24-26 March 2014.
Find out more at http://www.oecd.org/daf/inv/investment-policy/seasia.htm - http://www.oecd.org/daf/inv/mne/pfi.htm - http://www.oecd.org/globalrelations/seaforum.htm
The OECD’s FDI Regulatory Restrictiveness Index (FDI Index) measures statutory restrictions on foreign direct investment in 58 countries, including all OECD and G20 countries, and covers 22 sectors. This presentation by Stephen Thomsen describes the methodology used to calculate the FDI Index and how it is used as a tool for benchmarking countries, measuring reform and assessing its impact.
Read more at: http://www.oecd.org/investment/fdiindex.htm
This presentation by Stephen Thomsen was made at the session "Investment policy reform and regional integration" during the 2nd ASEAN-OECD Investment Policy Conference held on 10-11 December 2014.
To find out more visit: http://www.oecd.org/daf/inv/investment-policy/2014-asean-oecd-investment-policy-conference.htm
This presentation outlines the investment policy review process that the government of Lao P.D.R. is undertaking in partnership with the the OECD and ASEAN as part of an active programme of investment policy reforms.
To find out more visit: http://www.oecd.org/daf/inv/investment-policy/viet-nam-investment-policy.htm
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• Inflation to fall then remain low.
• Global monetary and fiscal stimulus is far larger than seen in the GFC.
• Australian fiscal stimulus is around 8% of GDP.
• Cash rate to be around 0.25% for at least three years.
• Shares at risk of a pull back in the short term but should provide good returns on a 12-24 month view.
• Australian assets to benefit from better virus control, better stimulus, exposure to China.
• What to watch: risk of a “second wave”, timely economic indicators, unemployment/ bankruptcies,
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Inward FDI flows to developing economies in 2014 reached their highest level at $681 billion with a 2 per cent rise. Developing economies thus extended their lead in global inflows. China became the world’s largest recipient of FDI. Among the top 10 FDI recipients in the world, 5 are developing economies. What are the advantages and disadvantages of foreign direct investment for developing countries?
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The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invest in a diversified portfolio of 60-70 attractively valued companies to carefully control concentration risk. This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger, Andreas Karall and Andreas Vogelsanger who have more than 75 years combined experience managing investments in frontier markets, Asia and around the world.
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Performing Online Survey’s “An Added Advantage” Over Advertisementijtsrd
In this article we try to study about the importance of performing surveys and they have an added advantage over advertisement. In earlier years manual surveys were done often door to door but off late surveys are being done online all over the world. Most of the nations conduct online surveys and use this as a great strategy to create good products and provide good services to the people and avoid spending heavily on advertisements. Surveys offer many benefits and therefore have become famous for their convenience, comfort and accurate feedback from the consumers. This article is based on the recent trends observed in various sectors where surveys are done and advertisements are offered to the consumer. After doing the marketing research by the companies and the changes in consumer behaviour observed the following conclusion is drawn. Dr. Mamta Bansal | Mr. Mandeep Narang "Performing Online Survey’s “An Added Advantage” Over Advertisement" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38607.pdf Paper Url: https://www.ijtsrd.com/management/marketing/38607/performing-online-survey’s-“an-added-advantage”-over-advertisement/dr-mamta-bansal
The Policy Framework for Investment (PFI) is a non-prescriptive tool for improving investment policy for development. It helps governments to design and implement policy reforms to create a truly attractive, robust and competitive environment for domestic and foreign investment. The OECD is currently conducting a multi-stakeholder update of this instrument ensure its continued impact in a world that has significantly changed over the past seven years.
Find out more about the PFI and the update process at http://www.oecd.org/investment/pfi.htm
17 February – The Seventh Meeting of the Working Group on Investment Zones in Iraq, Paris, France
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Economic and investment outlook
• Expect a very large hit to global GDP in the June quarter from coronavirus driven shutdowns and
uncertainty, followed by some recovery by year end as shutdowns ease.
• Inflation to fall then remain low.
• Global monetary and fiscal stimulus is far larger than seen in the GFC.
• Australian fiscal stimulus is around 8% of GDP.
• Cash rate to be around 0.25% for at least three years.
• Shares at risk of a pull back in the short term but should provide good returns on a 12-24 month view.
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• What to watch: risk of a “second wave”, timely economic indicators, unemployment/ bankruptcies,
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Jimmy E Dadrewalla, European Finance Director at United Phosphorus - Corporate acquisition in different countries: How to successfully expand your global footprint
1. Corporate acquisitions in developing countries
How FDI flows have evolved & opportunities present.
Managing risks and cultural issues (Case study on
Ukraine and Brazil)
.
JIMMY E DADREWALLA – EUROPEAN FINANCE
DIRECTOR (UPL UK LTD)
2. Disclaimer
This presentation is for information purposes only for the CFO event.
The information in this presentation is subject to change without notice, its accuracy is not guaranteed, it may
be incomplete or condensed and it may not contain all material information concerning the Company
mentioned. The company or the presenter do not have any obligation to, and do not intend to, update or
otherwise revise any statements reflecting circumstances arising after the date of this presentation or to reflect
the occurrence of underlying events, even if the underlying assumptions do not come to fruition.
All information contained in this presentation has been prepared solely by the presenter. No information
contained herein has been independently verified by anyone else. No representation or warranty (express or
implied) of any nature is made nor is any responsibility or liability of any kind accepted with respect to the
truthfulness, completeness or accuracy of any information, projection, representation or warranty (expressed
or implied) or omissions in this presentation. Neither the author nor anyone else accepts any liability
whatsoever for any loss, howsoever, arising from any use or reliance on this presentation or its contents or
otherwise arising in connection therewith. This presentation may not be
used, reproduced, copied, distributed, shared, or disseminated in any other manner.
The distribution of this document in certain jurisdictions may be restricted by law and persons into whose
possession this presentation comes should inform themselves about, and observe, any such restrictions.
3. ABOUT UPL LTD
• Global business in Crop Protection space with turnover of $ 1.75 billion.
• Strong Manufacturing and distribution base with operations in 70
countries, with 70% of Business in international markets.
• Key international markets Europe, USA, Latam America (including
Brazil), Australia and Asia.
• European business across UK, France, Germany, Italy, Spain, NL & EEU.
4. Key Points Covered in this Presentation
• How Foreign Direct Investment has evolved in last decade.
• CFO’s Need to focus on Identifying risk and methods to mitigate the same
• Ukraine agrochemical markets and key acquisition challenges
• Additional points to be considered in acquisitions – for new and developing markets such
as Ukraine, Brazil, India, China , etc.
• Importance of Culture in Acquisitions & Mergers
• Brazil JV challenges
5. How Foreign Direct Investment has evolved in last decade.
• Historically most cross borders mergers and acquisitions activity have taken place from advance
country to advanced countries
• This pattern has now changed with more activity, arising from and targeted at developing countries
• While the United States continues to lead the world in foreign direct investments outflows, in some
recent quarters investment inflows to China have exceeded those to the United States.
• In developed markets the outlook is still for slow growth environment.
• While the USA and other developed countries have come out of recession, these recoveries have
relied heavily on fiscal and monetary expansion. As governments withdraw these measures, there are
concerns about how these economise function on their own.
• Also Europe continues to be a challenge and how it will tackle its sovereign debt
• In developing markets China (7.7%) & India (4.5%) continue to post the fastest GDP growth rates
among major economies. Brazil & Russia also present good growth opportunities.
• Most CFO expect that future growth for developed countries will come from acquisitions and
expansion in foreign markets.
6. Web table 2. FDI outflows, by region and economy, 1990-2012
(Billion of
dollars)
Region/economy 1990 2000 2012
France 36 177 37
Germany 24 57 67
Italy 8 7 30
Netherlands 14 76 (4)
Spain 3 58 (5)
United Kingdom 18 235 71
Switzerland 7 45 44
Canada 5 45 54
United States 31 143 329
Japan 51 32 123
Africa 1 2 14
China 1 1 84
Hong Kong, China 2 70 84
South-East Asia 2 9 61
India 0 1 9
Brazil 1 2 (3)
CIS 0 3 55
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics).
Web table 1. FDI inflows, by region and economy, 1990-2012
(Billion of dollars)
Region/economy 1990 2000 2012
France 16 43 25
Germany 3 198 7
Italy 6 13 10
Netherlands 11 64 28
Spain 13 40 28
Sweden 2 23 14
United Kingdom 30 122 62
Switzerland 5 19 4
Canada 8 67 45
United States 48 314 168
Japan 2 8 2
Africa 3 10 50
China 3 41 121
Hong Kong, China 3 71 75
South-East Asia 13 23 111
Brazil 1 33 65
India 0 4 26
CIS 0 5 82
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics).
7. CFO’s Need to focus on Identifying risk and methods to mitigate the same
• Although emerging markets offer attractive opportunities.
• CFO’s while focusing on the Business and Financial aspects of the acquisition , also
need to wear the risk management hat
• Even in countries where foreign investment rules are relaxed , governments are
prone to make sudden decision shifts in policy.
• In many emerging markets policies and regulations relevant to MNC’s such as
ownership limits, bidding rules, local competion rules continue to be implemented in
an unpredictable method. Eg: India forbids foreign companies from having 100%
ownership in the retail sector. These rules are now being relaxed
• Post acquisition the CFO needs to ensure the business will thrive given the host
countries policy towards tax, competition, labour, redudancy laws and other
complexities
• CFO needs to be convinced that the transaction return is high and the business
thrives in the new country.
8. Ukraine Favourable macro fundamentals and significant growth potential
• Despite economic downturn, Ukraine remains one of the largest and
fast-growing economies in CEE .
• 2 nd economy in CEE with the largest population
• 2nd anticipated real GDP growth in CEE over 2010-2014
• Ukraine is home to nearly 30% of the world’s black soil, is one of the
three regions in the world with the most fertile lands has low levels
of usage of CPP resulting in lower yields
• Ukraine agrochemical markets slated to grow at 15% -20% CAGR
for the next 3-5 years & is expected to exceed $ 1 bn in 2017.
• So cannot ignore this market
9. KEY CHALLENGES OF DOING BUSINESS IN UKRAINE
• Legal systems – Complex laws and time consuming court process.
Conflicts between Civil law and commercial law. If JV is external can be
referred in International courts. However matters may be referred to
Local economic courts (1-2 years to resolve)
• Antitrust laws (threshold of € 12 mm turnover too low)
• Cash transactions still dominates method of doing business, so makes
business valuation more complex
• High level of corruption (Corruption Perception Index 2012 – 144 out of
176 most corrupt countries – 2.6 put of 10)
• Government backing crucial
• Credit default way of life
10. • Ukraine committed to reform its laws
• Needs foreign investment to develop various sections of the economy
• New foreign investment policy
• Need for new products and technology
• For local entrepreneur who wishes to grow the business , the need to
move from cash to white business key to get JV partners and be credible
exporters.
• Need international partner to compete with big MNC based in Ukraine
• The cash components of transactions is coming down
SOME POSITIVES
11. RISK MITIGATION TO MANAGE THE BUSINESS
• Credibility of local partner pre-requisite
• Creating a structure and SPA which can work- Structure where the SPA is signed outside the
Ukraine, ( Netherland, UK, Cyprus) with English law
• External JV structures will ensure that all JV level disputes are resolved in international courts.
Although referral to local courts will be time consuming.
• Tie up funding and charge on assets through local banker.
• Tie up partly with an International Equity investors – eg structure will have a 3 year lock in
period. Call option if disputes or things do not go right. This helps at entry stage as these
investors have local knowledge and are usually have strong backing
• Important to have a clear exit plan for the JV partner
12. RISK MITIGATION TO MANAGE THE BUSINESS (contd)
• Valuation of the business –(official & cash) – Pay upfront only for the official
business with balance pay back only after entire business is made official.
• Tight charter of company (Articles of Association)- One member of the board with
veto rights – ????? any guesses
• Limit powers of General directors. Have own co-signatory as mandatory.
• Control on the board and board meetings 60%
• Warranties Implementation and managing partner expectations
• Do not join the bribery bandwagon, pursue though legal and government system-
may take time but is more solid. Important to understand implications of UK bribery
act.
13. Additional points to be considered in acquisitions – for new and developing markets
(India, China,Russia , Brazil, etc)
• Drivers – Major driver access to products, registrations and distribution access
• Managing warranties of share holders- When share holder is MNC its easy. But if its an
individual retiring - worth of warranty may be questionable.
• Best to retain some payments to be paid over 3-4 years, offer some interest payment.
• In retrospect the sellers assumptions were right, no claims
• Where shareholder is still going to run the business, clear objectives with definitive exit
and terminations options.
• Non compete clause (issue in Ukraine)
14. Importance of Culture in Acquisitions & Mergers
• Successful acquisitions and mergers must be based on strategic, financials and other objective criteria.
• However, ignoring a potential clash of culture can lead to failure. Statics show that 1/3 rd of mergers fail
within the first 5 years
• Culture exists and consists of the long standing , largely implicit shared values, beliefs and assumptions
that influence behaviour , attitudes, and meaning in a company (or society)
• Different cultures in Europe, Chinese & Indians, Brazilians
• Anglosaxan culture – Less uncertainty, more planning, but longer project time lines, respects deadlines
and contracts. Under promise and over achieve.
• Asian & Latin culture different – very uncertain , people take on more that they can digest, contracts
can be broken, shorter project timeline. Willing to compromise perfection to get macro results.
• More acquisitions from East to West so clear culture issues we need to understand
15. Key Human problems to avoid
• Loss of key people
• Winners vs losers (we vs they)
• Judgement vs respect
• Fear of the unknown –insecurity is the enemy
• Loss of organisational effectiveness
How to bridge cultural gaps and build most effective JV teams
• Retain key leaders
• Communicate the vision
• Address the new organisational structure as early as possible
• As leaders of the acquiring company , go out of the way to acknowledge as many positive
aspects of the acquired company as possible
• Senior leader should communicate in person as much as possible
• Create an integration plan
Source:www.senndelaney.com
16. JOINT VENTURES ARE UNIQUE
• Brazil key CPP market $ 11 bn still consumes less pesticides vs USA. (In 2005 the market
was $ 2.5 bn)
• 50%-50% perfect case for deadlock (but for Acquiring company access to market key)
• Partner has been in country for last 30 years so has seen both peaks & lows
• Both have different aspirations
• Existing partner wanted to have steady sales , Acquiring company was more ambitious
and wanted 2.5 time the sales? So challenge of how to manage this.
• Existing partner agreed but demanded Working capital of 100% of the amount and that
Acquirer should pay for the same.
• Acquirer asked for dilution in turn which was turned down
• Finally both agreed for restrained growth linked to debt levels and EBITDA
17. JOINT VENTURES ARE UNIQUE (contd)
• Where 51% -49% your situation is better.
• JV aspirations made much more clear & Stronger shareholders agreement.
• Management local to develop business and work on credit terms
• Corporate policies of Acquiring company would apply.
• CFO choice of Acquiring company.
• Growth plans linked to debt levels and maintenance of EBITDA ( debt cannot exceed (x)
times the average EBITDA in first year, tapering down by third year)
• Initial debt ceiling agreed , any excess debt would be charged at higher rate by Acquiring
company
• Clear exit policy at end of 5 years for the existing partner- linked to avg EBITDA multiples
less Net debt.
18. THANK YOU FOR YOUR PARTICIPATION
QUESTIONS & DISCUSSION