by Thomas D. Avazian, Global Banking and Markets Product Executive, Bank of America Merrill Lynch
Escrow services have a crucial role to play in helping multinationals to manage risk as they increase their business activities in Latin America.
Latin America’s improving macro-economic and political stability is encouraging multinationals to consider establishing a presence in the region. In addition to Latin America’s traditional strengths in commodities and energy, the growing prosperity of many of its citizens, positive demographics, and market liberalisation are creating new consumer markets that offer attractive growth opportunities, especially when compared to many OECD countries.
However, despite huge improvements across the region, doing business in Latin America still carries numerous risks: including price, transaction, regulatory and counterparty risks. These risks, which can occur in many different circumstances, need to be understood, anticipated and effectively mitigated using escrow services if global companies are to achieve their strategic objectives in Latin America.
Managing M&A-related risk
For companies buying into Latin America through mergers and acquisitions (M&A) activity, a number of risk-related challenges must be overcome. For example, during the transaction itself, it is essential to ensure that the funds are transferred from one company to another at the correct time and concurrently with the transfer of ownership.