Chapter 4
Private equity investing in emerging marketsa
4.1 INTRODUCTION
4.1.1 Overview
Emerging economies represent over 80% of the world’s population and landmass, yet their financial markets are currently much smaller relative to GDP than those in mature markets. The total value of all emerging market financial assets is equal to just 165% of GDP, well below the 403% financial depth of developed economies (Roxburgh and Lund, 2009). While the share of emerging economies in the global capital market has grown fast, this has been from a relatively small base. Emerging economic regions, which do not yet have well-developed markets for finance, continue to have a considerable need for capital to finance infrastructure and communication investments. Consequently, private equity (PE) investors are increasingly being attracted by this need for financing, especially from non-quoted corporations.
A discussion of the PE landscape in emerging economies is inherently difficult due to the very large variation in their characteristics. As a result, any sweeping generalizations that we make on the causes and consequences of the PE investment activity in these countries are disputable. Nevertheless, we make an attempt to provide a basic framework that describes what we think are the most important issues associated with PE investing in emerging markets.
Emerging markets appeal to PE investors for many reasons. Strong economic growth, improving macroeconomic conditions, better physical and legal ...
