Why Integration Beats Deal-Making in Emerging Market M&A
Across developing markets, fragmentation is not the exception but the norm. In sectors ranging from logistics and healthcare to industrial services, fintech infrastructure, and energy services, markets are often dominated by hundreds of small, local operators. Many are founder-led, undercapitalized, and constrained by limited access to technology, talent, and institutional financing. These conditions make emerging markets particularly well suited to build-up strategies, also known as buy-and-build, where investors acquire a platform company (a core business) and expand it through a series of smaller add-on acquisitions.
Private equity firms and long-term investors increasingly favor this approach in emerging economies because organic growth alone is often slow and uneven, reflecting demand volatility, infrastructure gaps, and institutional constraints. According to Bain & Company’s research on private equity value creation, buy-and-build strategies are especially effective in fragmented markets where scale, professionalization, and governance upgrades can materially change a company’s growth trajectory since baseline operating maturity is typically low. In emerging markets, these effects are amplified: consolidating fragmented operators can unlock efficiencies that simply do not exist at the single-asset level, as scale enables cost absorption, bargaining power, and systems investment.
What ultimately determines success in mergers and acquisitions, however, is not the number of acquisitions completed, but the ability to integrate them into a coherent operating platform. In emerging markets, post-acquisition execution often matters more than deal pricing because operational gaps and informality increase value leakage if integration is delayed. As highlighted in research on M&A success factors, the transition from buying assets to building an institution requires operational discipline, local insight, and a long-term view of value creation.
This article examines why integration capability has become the decisive factor in emerging market M&A. It focuses on how fragmented market structures amplify the importance of post-acquisition execution and institutional building. By analyzing integration challenges and platform dynamics, it shows how disciplined execution enables the transition from asset ownership to scalable operating platforms. The analysis emphasizes integration as a core driver of durable value creation rather than deal activity alone.
Fragmentation as a Source of Structural Advantage
The importance of integration in emerging markets becomes clearer once fragmentation is viewed not as a market flaw, but as a defining structural condition. Fragmentation reflects enduring structural realities rather than temporary inefficiencies. Many sectors evolved around local demand, informal networks, or regulatory gaps, as weak capital markets, uneven enforcement, and limited access to scalable financing historically prevented small operators from expanding beyond local geographies.
A clear example is Brazil’s pharmacy retail sector prior to consolidation, where thousands of small, family-owned drugstores coexisted with minimal scale or professionalization—a dynamic that enabled the rise of Raia Drogasil, which built a national platform by standardizing operations, logistics, and governance. These conditions are especially visible across regions such as Africa, Southeast Asia, and parts of Latin America, where entire value chains—logistics, healthcare delivery, SME (small and medium-sized enterprise) lending, and industrial services—remain largely unconsolidated. In these contexts, consolidation can enable formalization, scale, and governance upgrades that transform local operators into durable regional platforms.
In such environments, fragmentation does more than shape competition—it determines how scale and efficiency are achieved. Value creation therefore depends less on individual asset quality and more on the ability to integrate operations across a broader platform. Although operating in fragmented markets increases complexity, it also creates a powerful source of upside. By consolidating smaller players, investors can spread fixed costs across a larger base, centralize procurement, and standardize systems and processes. Research on value creation in M&A shows that, in fragmented industries, these changes often drive disproportionate gains through operational synergies and efficiency improvements that standalone players cannot capture.
Valuation dynamics further reinforce the case. Subscale businesses in emerging markets typically trade at lower multiples due to size constraints, informality, and governance risk. When these assets are combined into a professionally managed platform, the resulting entity often re-rates into a higher valuation bracket. One analysis of buy-and-build strategies shows that platforms executing disciplined add-on programs—such as rolling up small regional operators under a unified brand, management team, and reporting structure—consistently achieve higher exit multiples than standalone assets, particularly in fragmented industries.
Post-Acquisition Execution in High-Complexity Environments
If fragmentation defines where value comes from—because value itself is dispersed across many small, disconnected operators—execution determines whether that value is actually captured. Post-acquisition integration is therefore decisive, as gaps in systems, reporting standards, labor practices, and corporate culture can quickly erode expected synergies if left unaddressed. Evidence from Harvard Business Review’s analysis of failed integrations shows that underperformance is far more often driven by execution breakdowns—such as unclear leadership roles and weak integration planning—than by flawed deal strategy. Operational discipline becomes the primary differentiator once acquisitions close. Successful platforms prioritize early standardization of core functions such as finance, procurement, compliance, and IT, while deliberately preserving local operating expertise where it creates value. According to KPMG’s research on post-merger integration, early operational alignment significantly increases the probability that synergies materialize, particularly in cross-border and emerging-market transactions. Delayed integration allows inefficiencies and legacy practices to persist, making later harmonization more costly and disruptive, while early alignment improves transparency and managerial control.
Technology and people integration reinforce this discipline and must advance in parallel. Many acquired businesses operate on incompatible or manual systems, limiting visibility and coordination across the platform. PwC’s 2023 M&A Integration Survey shows that companies deploying digital accelerators early—such as centralized ERP systems to integrate finance and operations, cloud-based financial reporting platforms, and standardized CRM tools—achieve stronger governance and faster decision-making. At the same time, founder-led teams may resist centralized control or fear loss of autonomy. Research from Harvard Business Review on leadership in M&A also shows that integration succeeds when executives actively shape the combined culture, clarify leadership roles, and align incentives—factors that are as critical as systems and processes when organizations span diverse institutional and regulatory environments.
From Local Consolidation to Scalable Emerging-Market Platforms
Once integration discipline is established, the focus shifts from managing complexity to unlocking growth. Successful build-up strategies in emerging markets move beyond cost synergies toward long-term platform creation, as scale enables businesses to win larger contracts, expand geographically, and invest in capabilities previously out of reach. In these markets, size also confers credibility with customers, regulators, lenders, and suppliers by signaling stability, compliance capacity, and reliability in environments where institutional trust is fragile. As a Forbes report on private equity in emerging markets notes, consolidated platforms are therefore better positioned to partner with multinationals, access global capital markets, and withstand macroeconomic volatility than fragmented local operators.
As operational scale stabilizes the core business, growth increasingly becomes a question of geographic reach rather than internal complexity. Cross-border expansion further amplifies value creation. Many emerging-market platforms such as MercadoLibre and Nubank adopt regional strategies, operating across multiple jurisdictions while centralizing governance and capital allocation. Preqin’s research on global private equity strategies shows that investors increasingly favor platforms capable of scaling across regions rather than remaining confined to single-country markets, since regional scale reduces concentration risk, broadens addressable markets, and improves access to diversified pools of capital and strategic partnerships. Beyond geography, scale also reshapes the platform’s relationship with institutions. As platforms scale, they often become visible counterparts for regulators who are seeking more formalized, compliant, and transparent market participants. In sectors such as fintech infrastructure, healthcare services, and energy-related industries, consolidation can reduce regulatory risk over time by replacing informal operators with standardized, auditable entities. This dynamic creates a virtuous cycle: scale improves compliance, compliance improves access to licenses and public contracts, and regulatory trust supports further expansion.
Access to capital also improves materially at the platform level. While single-asset businesses in emerging markets often rely on short-term or relationship-based financing, consolidated platforms are better positioned to attract development finance institutions, regional banks, and long-term institutional investors. This broader capital base enables reinvestment in technology, talent, and risk management, reinforcing the platform’s competitive position. In practice, many successful build-ups—for example, Kavak’s acquisition of the Argentine digital auto platform Checkars—use early acquisitions to establish institutional credibility, then leverage that credibility to finance subsequent growth on increasingly favorable terms. Over time, these dynamics allow platforms to shape—not just participate in—their markets by setting operational standards, influencing pricing structures, and professionalizing fragmented sectors.
Building Institutions Beyond the Deal
In emerging markets, M&A success is rarely determined at signing. It is shaped over months and years, when investors face the harder task of transforming fragmented assets into functioning institutions. Deals are abundant, but scalable platforms are scarce. The constraint is not capital or opportunity—it is the ability to impose coherence, discipline, and governance across complexity. Integration, rather than deal-making, separates compounding platforms from stalled roll-ups. In environments where trust is fragile and institutional infrastructure inconsistent, value arises not from owning assets, but from organizing them—financially, operationally, and culturally—into systems that scale reliably.
As a result, value creation depends less on importing standardized playbooks and more on adapting operating models to local conditions while maintaining disciplined controls, transparency, and accountability. Durable platforms distinguish themselves by prioritizing institutional capability early in the build-up process. Rather than focusing solely on asset accumulation, successful consolidators invest in shared services, professional management structures, and scalable operating systems that support consistent execution across geographies. Over time, this institutionalization changes the platform’s risk and growth profile. Operating leverage improves, execution becomes more repeatable, and strategic flexibility expands. This is why well-integrated platforms often command exit valuations that exceed the sum of their individual assets: buyers value businesses that operate independently of founders, demonstrate reliable governance, and scale without disproportionate management overhead.
As competition for build-up opportunities intensifies, early platform builders gain advantages that compound over time. Scale enhances credibility with regulators, lenders, and large customers, while centralized systems and deeper talent pools create barriers that fragmented competitors struggle to replicate. For investors, the implication is straightforward: capital and acquisition opportunities are increasingly abundant, but execution capability remains scarce. In fragmented emerging markets, sustainable returns are ultimately created not by acquiring assets, but by building institutions capable of compounding value across cycles and geographies.