| Practice area: | Privatisation | Transaction advisory |
|---|---|
| Client: | N/A |
| Published: | 16 February, 2023 |
| Keywords: | PPP Privatisation Transaction Advisory |
Many countries have privatised some or all of their State-Owned Enterprises in order to improve the efficiency of their economies and raise revenues for the government. Some of the privatisation experiences have been more successful than others and a wealth of knowledge on what works in a privatisation has been accumulated over the last 40 to 50 years. The present report draws on this knowledge and over 40 years personal experience of Dr. Cezley Sampson in several developing and emerging market economies and identifies best practices which should be followed to ensure the success of a privatisation.
This London Economics guide discusses how the ground for a successful privatisation needs to be prepared, sets out the key elements of a privatisation, reviews the different forms of privatisation and their pros and cons, and describes the post completion activities. It concludes with a number of lessons learned which should be taken into account to ensure the success of a privatisation. Ignoring best practice will result in disappointing privatisation results. Privatisation practitioners, whether on the buy side or sell side, should draw on the best practices presented in the report when planning or considering future privatisation transactions.
Some of the key lessons that emerge from this report include the following:
- For markets generally to work there is the need to eliminate restrictive business practices and facilitate competition.
- Competition is now possible in certain industries once operated as monopolies, such as
electricity and telecommunications. The competitive parts should be vertically separated from the monopoly and the monopoly part subjected to independent regulation. - For the industries traditionally operated as monopoly SOEs, liberalisation should be accompanied by strong and independent regulatory framework.
- Privatisation and PPPs must be tailored to the conditions prevailing in a country and should be specific to the investment opportunity being offered to the market.
- The key success factor in a privatisation is preparation; success depends largely on the depth of the preparatory work carried out in advance of offering the opportunity to the market, setting realistic timelines, ensuring that there is a dedicated
- Privatisation Authority to carry through the process and a cabinet-level body to lead the process and make speedy and informed decisions.
The guide is accompanied by an Annex which describes in greater detail two case studies of privatisation of state-owned enterprises in Tanzania and Oman.
The guide and the annex can be ordered here from London Economics.
The author of the guide, Dr. Cezley Sampson, has been involved as a privatisation and PPP advisory consultant in well over a dozen countries including Afghanistan, Botswana, Ghana, India, Jamaica, Jordan, Kenya, Namibia, Oman, South Africa, UK and Zimbabwe, and over three hundred privatisation and PPP transactions.
London Economics provides advisory services for vendors and purchasers in M&A transactions, focusing on infrastructure and regulated industries. Our team of economic and financial experts advises on transaction structuring, economic and financial due diligence, transaction management, and auction design. Our team’s experience covers trade sales and IPOs as well as concessions and complex contracts.
If you would like to learn more about London Economics’ expertise in privations and transaction advisory services, please contact: [email protected]