Greenfield specialists are the way forward in Emerging Markets
Given the size of the opportunity it is striking how little money is being invested by large financial institutions, private equity houses and big quoted groups in Emerging Markets. Why? And what is the way forward?
There are of course serious risks attached to investing in Emerging Markets –corruption, currency fluctuations and recruitment all spring to mind.
But we think the failure of what you could broadly describe as the West to invest in Emerging Markets reflects a failed mindset. Typically, western investors look for a viable platform that can be quickly scaled up. That inevitably means seeking out the larger groups. These are family owned and, understandably, families do not want to relinquish control, except as very high prices. Even then, there are inevitably problems around governance in any family run business in these countries.
There is an alternative approach and it is one which has been proven by many. This is to take the risk of setting up a greenfield operation in a country. It is an approach which has worked reasonably well for the big dialysis operators – Fresenous and Diaverum. But is also the approach adopted by TVM Capital in the Middle East and India (see our interview). It is also the strategy adopted by Belgian care home group Senior Assist which plans to triple its nursing home start up in Chile to 1,500 beds, is also active in Colombia and is looking at Thailand, Turkey, Russia (see news story).
You can see successful greenfield roll outs within countries as well. Look at how Vikram Vora at Mydentist is rolling out the largest Indian dental chain. Or the way that Concord has rolled out imaging centres in some 140 public Chinese hospitals.
We suspect that in Emerging Markets, as in Europe, pure plays who are active only in one sector, such as dialysis or dentistry, can rapidly trump the supposed synergies enjoyed by a family-owned hospital platform which runs a care home, a couple of reha units, a lab group and a medicalised homecare unit. The latter risks being a Jack of All Trades and a master of none.
We think the race will be won by specialists who have worked out how to roll out their offer across multiple countries.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
