Emerging Markets Partnerships
Let’s Make a Deal
It takes two to tango, and (at least) two parties to make an emerging markets deal or partnership.
To set the stage for an emerging markets deal, there is much work to do: analyzing the local market, assessing the regulatory climate and macroeconomic conditions, and defining a clear value proposition. Even if all details are meticulously planned, signing a deal with the wrong partner can lead to spectacular failure.
Working with a partner translates to a loss of control, as all decision-making power is not housed under the same corporate structure. Incentives, however carefully aligned, can diverge, leading to friction and loss of profitability. These issues arise in all business, but are dramatically exacerbated in the emerging markets environment, which is more often than not defined by a weaker rule of law.
While the contract is the first and last step in maintaining a partner relationship in a developed nation, in the emerging markets context, the contract is just one piece of the puzzle. In this context, contracts should not be used as the sole point of compliance leverage, and careful relationship management needs to be active and ongoing.
However, signing the deal with the right partner can lead to spectacular profits. The partner can provide on-the-ground intelligence on the constantly shifting local market and regulatory landscape. The partner can leverage their local resources and relationships on your behalf, allowing you to maintain a leaner, more efficient operation at home and on the balance sheet.
We have found that the incredible efficiencies that partnerships can bring can be game changers. For instance, one of our clients is looking at a 40-50% increase in total company revenues (domestic + international) in the coming year due to a partnership in the Middle East we put in place for them this year, with little to no increase in overhead expenditures. Following this success, we are strategizing together on which market will be the best starting point for them in Latin America.