M&A strategies in emerging markets: risks, cultural differences, and trends

Understand the challenges and opportunities of investing in countries with high attractiveness and instability

Emerging markets have been gaining prominence as promising destinations for companies and investors seeking new growth avenues outside traditional major centers.

These are economies with room for expansion, strong domestic consumption, accelerated technology adoption, and sectors still in consolidation. But they also require heightened vigilance.

Mergers and acquisitions in these countries do not follow the same playbook as in developed economies.

Factors such as political instability, regulatory uncertainty, and cultural differences have a real impact on the success or failure of the transaction.

On the other hand, it is precisely these factors that create entry barriers and increase the potential return for those who are prepared.

Key risks in M&As in emerging markets

• Volatile regulation: in many countries, political changes lead to frequent shifts in the rules of the game. Competition laws, foreign capital restrictions, labor and tax requirements vary not only between countries but also among states or provinces. Legal uncertainty is one of the greatest challenges and needs to be thoroughly mapped.
• Macroeconomic environment: inflation, high interest rates, and currency fluctuations directly impact company valuations and the feasibility of the operation. Brazil, Argentina, and Turkey, for example, are markets with high potential but require detailed economic analysis to avoid hasty decisions.
• Political risk: changes in government can lead to abrupt shifts in economic policy, affect country risk perception, and even jeopardize contracts. Institutional risk should be monitored from the beginning of the negotiation.
• More complex due diligence: evaluating a company in an emerging market may involve challenges such as lack of transparency, low accounting standardization, complex corporate structures, and limited traceability of the supply chain. Due diligence needs to be more thorough and tailored to the local reality.

Cultural differences: a risk often underestimated

Even when the numbers make sense, integration between companies can fail due to a lack of cultural alignment.

In cross-border mergers, differences in management style, communication, and work practices directly impact the performance of the new structure.

This applies both to talent retention and to team motivation during the transition period.

Companies that execute a well-structured integration plan, with clear goals, active communication, and attention to local culture, tend to preserve more value in the medium to long term.

Reputation with stakeholders, internal trust, and business continuity depend on this care.

What has been shaping M&As in developing countries

Three trends have been influencing the mergers and acquisitions landscape in emerging markets:

1. Search for local technology: startups and native companies with digital solutions, AI, automation, and scalable platforms have been targets of large global groups seeking to accelerate their innovation.
2. Pressure for ESG practices: investors are attentive to acquisitions that include environmental, social, and governance criteria from the outset of the operation. This directly impacts valuation, legal risks, and access to financing.
3. Operational resilience: after the pandemic, companies have come to value more robust supply chains, local presence, and agility in response. Transactions that offer greater autonomy and less external dependence have gained priority.

Ready to explore new markets?

Conducting M&A in emerging markets requires more than capital and intent. It requires accurate reading of the context, strategic flexibility, and adaptability.

Upside Investment has hands-on experience in international negotiations and structures M&A projects with an integrated approach: economic, legal, cultural, and operational.

Looking to identify opportunities and structure your strategy? Get in touch with our team.