Are Western investors out of love with Emerging Markets?
“Health care services is a dirty enough business in Europe without us seeking more risk in Emerging Markets” was how a big private equity investor summed up his sentiment.
That partly reflects investor concern around the US International Anti-Bribery and Fair Competition Act Bribery Act, the US Foreign Corrupt Practices Act and the UK Bribery Act. “The US laws apply to anyone with a US nexus, which means everyone.”
There is also a long line of failed investments made by Westerners in emerging markets. Look at Cerba’s recent retreat from Menalabs in the GCC. Or Orpea’s faltering moves in China. Or Life’s debacle with Max Healthcare in India. Or how Mediclinic got a bloody nose with Al Noor in the GCC. And not many US academic medical centres have managed to make money consistently abroad.
Whilst there have been successes, they are mainly closer to home. Mid Europa has done well in central and eastern Europe. So has Medicover. Watch how US investor Columbia Pacific gets on with the sale of its big hospital business in India and SE Asia.
And it is not just fear of legislation which could land you in jail. Successful health care operators in Emerging Markets are built on strong, local relationships with politicians. What happens to political risk when the founder retires?
Against this are the obvious attractions of selling scarce services at free market prices to a fast-growing middle class.
But right now the risks outweigh the rewards for many US and European investors and operators. Which is a shame because there should be a huge opportunity for skills transfer.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
