According to Marsh, Mercer and Kroll study, China, India and South East Asia are most promising regions but also contain most investor risk: According to a survey carried out by Marsh, Mercer and Kroll, in cooperation with the Economist Intelligence Unit, the areas with most business potential are those exposed to the highest levels of risk. The “M&A beyond Borders: Opportunities and Risks” report surveyed 670 executives in January in multinationals about their investment policy. 57% of foreign investors consider that China, India and South East Asia have the most potential, way ahead of North America (43%), Western EUROPE 41%, Eastern EUROPE 31%, Latin America 29%, Middle East 27%, Australia, Japan and Korea 25% and Africa 19%. On the other hand, China, India and South East Asia are considered the most risky regions, with an average risk rating of 5.3 points out of a maximum 8 for a range of business-critical risks, just behind Africa (5.5 points). Latin America 3.8 and the Middle East 3.5, are considered average risk areas, whilst Australia, Japan and Korea region was considered the least risky place to invest, with an average risk rating of just 1.6, followed by Western EUROPE 1.9 and North America 2.1 Eastern EUROPE 2.8. In connection with the increasing interest in Eastern Europe, 44% of respondents said that they had “significant” or “very significant” investments in the area. The report explained that, “Confidence in the region is strong among both domestic corporations and multinationals contemplating investments. Nevertheless, a number of significant issues including dependable judicial systems and political influence on business do require more attention if Eastern Europe wants to have a risk profile similar to those of its Western neighbours and other developed states.” Although difficulties linked to the intellectual property regimes are nothing new, especially in China, new investor pitfalls are emerging linked to new environmental requirements. Faced with this situation, China has decided to respond by imposing string environmental improvement measures. Other specific local situations contribute to increasing investor risk, such as protectionism, cultural differences in organisations and shareholder bases that are sometimes too family-dominated. The survey says that traditionally securities in Asia have been linked to the family-owned conglomerates and recommends that companies thinking of investing gain a full understanding the role played by the family in a company structure, before investing, particularly because of the political connections involved but also because of the sensitivity about intellectual property, regulatory changes on the environment or the absence of information about possible contingent liabilities. Maintaining local teams is also a problem: in China, the mobility of managers aged between 25-35 is now 67% and wage inflation more than 10%. In India, a shortage of around 500,000 professionals is predicted in the computer sector by 2010, which is one of the most advances sectors there is. There is also the question of product quality, particularly in China. According to a study, 68% of product recalls registered in the US during the first half of 2007 involved Chinese products. The report also underlines the difficulty of carrying out acquisition audits when little information is made public. Overall, the survey underlines that: 1) during the past 18 months, only 35% of respondents said that 10% or more of their revenue has been attributable to mergers and acquisitions, while 68% expect it to be more than 10% for the next 18 months; 2) organisational cultural issues and human capital integration issues were cited as the two most significant issues faced by respondents; 3) smaller and medium-sized companies expect more from M&A than larger firms and only 4% of potential acquirers think that state-owned investment funds, such as sovereign wealth funds, are likely to offer the strongest competition. (I.L.)