When pursuing opportunities in Merger & Acquisitions, most professionals concentrate their attention on private financial institutions that operate in this arena, such as investment banks and private equity/venture capital firms. However, given the significant gaps in capital provided to developing economies, a number of governments and non-profit groups have organized “Development Finance Institutions” (DFIs) with a mandate to provide capital and financial services to underserved markets. Moreover, a number of these DFIs have internal asset management divisions that take equity positions in businesses located in specific markets.
The International Finance Corporation (IFC), a member of the World Bank Group, is a well-known example of a DFI that has the mission of providing capital and financial services to the developing world. While carrying the title of the “largest global development institution focused exclusively on the private sector,” the IFC’s purpose is to help developing countries achieve sustainable growth by financing private sector investments in profitable businesses in emerging markets. In addition to a wide range of divisions, one in particular, the IFC Asset Management Company, provides qualified professions the opportunity to gain experience in private equity and venture capital with an emphasis on equity and debt investments in some of the poorest countries. According to IFC’s Annual Report, the IFC Asset Management Company has approximately $4.5 billion under management and has made 33 investments totaling more than $1.7 billion since 2009. Essentially, while some investment banks and/or private equity/venture capital firms focus on traditional areas such as energy, technology or consumer goods, the IFC Asset Management Company focuses on investments in developing countries.
DFIs provide young professionals the opportunity to combine (i) a strong interest in M&A and corporate finance with (ii) the desire to create sustainable group in some of the most underdeveloped economies. Because DFIs are required to provide financial advice and invest in areas “traditional” financing sources do not, these areas typically involve some of the poorest countries and industries, which usually means that there is a greater risk of losing one’s investment. What this means for young professions is that they obtain invaluable experience because these conflicting factors cause them to seek out innovating solutions to very complex issues. Following a stint with a DFI, traditional private equity/venture capital firms can be confident that such a candidate can handle the M&A process in more developed economies. Finally, DFIs provide professions with the opportunity to be a part of an organization that helps demonstrate that viable enterprises can be successful in some of the most challenging markets.