Cross-Border M&A in Emerging Markets: Five Things Buyers Get Wrong

The gap between the data room and the ground

Cross-border M&A in emerging markets has a rhythm that repeat players learn but first-timers rarely anticipate. The documents look familiar — the share purchase agreement follows the same architecture, the representations and warranties cover the same categories — but the gap between what the data room shows and what the ground tells you is wider than in developed markets, and it closes on a different timeline.

This article walks through five patterns our cross-border M&A teams see repeatedly across Latin America, Africa, and Southeast Asia. They are not reasons not to do the deal. They are reasons to do the diligence differently.

1. The local partner is not who you think they are

In many emerging markets, the local partner or target shareholder appears in the corporate records as a single entity or individual. The reality is often a web of family holdings, informal understandings, and unwritten succession expectations. The corporate records tell you who owns the shares today. They do not tell you who will claim an interest when the deal is announced.

Our São Paulo, Johannesburg, and Singapore offices all have versions of the same story: a deal that looked clean on paper and then got tangled in claims from relatives, former partners, or political figures who were nowhere in the corporate documents. The fix is not more legal documents — it is more time on the ground, more interviews, and a willingness to walk away when the picture will not come into focus.

2. Currency and capital controls are deal terms, not background noise

A purchase price negotiated in US dollars means something different when the target’s revenue is in Nigerian naira, Argentine pesos, or Vietnamese dong, and when the central bank’s approval is required to repatriate dividends. Currency risk and capital-control risk are not macroeconomic abstractions — they are deal terms that should be priced, allocated, and hedged in the transaction documents.

We routinely include currency-adjustment mechanisms, offshore holdback structures, and capital-controls risk-sharing provisions in emerging-market SPAs. They add complexity, but they also add honesty: both sides know what happens if the exchange rate moves by 30 percent between signing and closing, because it is in the contract.

3. Regulatory approval is not binary

In developed markets, merger control and foreign-investment review are mostly predictable: a filing is made, a waiting period runs, and approval either comes or it does not. In many emerging markets, regulatory approval is a negotiation with no fixed timeline and no published playbook. The relevant ministry or commission may have broad discretion and limited published precedent.

Successful deals build regulatory strategy into the timeline from the start, treat the approval process as a workstream with its own budget and its own local counsel, and do not assume that a “no objection” letter from one agency binds another.

4. The earn-out that looked good on paper

Earn-outs are common in cross-border deals where the buyer and seller disagree on valuation. In an emerging-market context, they are also common where the seller’s financial records are incomplete and the buyer wants to tie part of the price to post-closing performance. The problem is that an earn-out requires the buyer to run the business in good faith and report accurately, and the seller often has limited ability to verify either.

We have seen earn-outs that looked elegant in the spreadsheet become unenforceable in practice because the accounting standards differed, the buyer’s reporting was opaque, or the business was integrated so quickly that stand-alone performance could not be measured. The solution is not to avoid earn-outs — it is to write them with a level of specificity that feels excessive at signing and proves necessary later.

5. The exit that is not an exit

Every cross-border acquisition should be planned with an exit in mind, even if the buyer intends to hold indefinitely. In emerging markets, the exit path may be narrower than it looks: the local stock exchange may lack liquidity, a trade sale may be difficult without the original seller’s cooperation, and an IPO may require a level of financial disclosure the target has never produced.

We advise buyers to model at least three exit scenarios before signing, to include drag-along and tag-along provisions that work under local law, and to ensure that dispute-resolution clauses specify an arbitral seat and rules that both sides can enforce. The exit is part of the entry. It always is.

This article is provided for general information only. It is not legal advice and does not create an attorney-client relationship.