Foreign direct investment inflows into the country may not be impressive but new observable trends seem to offer hope.

In the case of acquisitions and mergers, though at very low level compared to recent global activity, foreign companies are seen making decisions more on a country’s vision rather than a simple opportunity.

Yet the majority of newly incorporated companies prefer joint ventures.

Similarly, even well-performing domestic groups or companies that have reached saturation in a particular type of business are looking to diversify, through acquisitions and joint ventures.

Many are looking for foreign partners in changing industry dynamics which require networking, technology transfers, innovation, productivity improvement, human talent and expertise etc — the factors that are calling the shots in a transforming domestic and international market.

Within the domestic market, there is a strong desire to diversify through the acquisition of existing enterprises.

Many professionally run corporations have acquired business volumes, scale and entrepreneurial ability to qualify themselves for joint venture partnerships with multinationals.

There is at least some anecdotal evidence highlighting the strategic convergence of interests of domestic and foreign businesses. And to quote a former bank president, the emerging foreign investment trend shows that decisions are primarily motivated by a strategic vision of Pakistan.

Apparently, foreign investors have to take into account a company’s/country’s work and management culture and their long-term growth potential. Going by Pakistan’s experience, it is also not difficult to exit.

The response of progressive businesses facing difficult challenges is: ‘adversity brings new opportunities and challenges’

Foreign banks which exited the country were acquired by local peers, Even a non-banking company — ICI Pakistan — was acquired by a leading local business group Younus Brothers group. Now ICI is considering acquisition of Wyth Pakistan Limited and its board has already approved acquisition of a local firm Civin Pharmaceutical Private Limited.

A new investment trend is emerging. A tyre importing firm in Lahore has acquired stakes in companies in South East Asia to cut import costs and stay competitive in a domestic market hit by smuggling.

Similar advice was given by Mr Sahukat Aziz, who, during his tenure as finance minister, asked textile tycoons to offer stakes to foreign companies buying their goods in order to boost exports. K&N has recently acquired a poultry processing plant in the US.

Pakistan’s direct investment abroad has surged from an annual $1.36bn at the end of December 2010 to $1.98bn in 2016.

Perhaps the growing convergence of interests between local and foreign investors may have been what prompted TerraBiz to organise, what it has labelled as, the ‘First Pakistan Mergers and Acquisitions Conference 2016.’

The speakers — top corporate executives and M&A strategists — focused on their experience in acquisitions and mergers; initially led by banks and now stated to be extending to non- financial corporations.

Some of the trends, and ideas brought up by the speakers, in panel discussions and question- and -answer sessions, emerged from their personal experience in M&A activities. These included negotiation skills and management practices to tackle conflicting company and cultural practices in order to make the merger or acquisition a success.

But so far domestic M&A activity in various industry segments, including banks, were mainly the outcome of decisions of foreign companies to quit emerging markets, including Pakistan, in order to consolidate businesses in the country of their origin; especially after the global financial turmoil of 2008/2009.

Multinational’s withdrawal because of challenges in the domestic market has been rare. In fact MNCs have been re-investing their earnings liberally which, according to the latest figures, contribute to nearly 40pc of the total annual foreign direct investment.

Some progressive domestic companies are looking for joint ventures as industry dynamics change. Local corporations run by professionals, (even with family ownership) are not averse to selling their existing assets/stakes.

The Hussain Dawood group has sold Dawlance and major stakes in E-Foods. The group set up a joint venture — Dawood Hercules — as far back as the 1960s.The response of progressive businesses facing difficult challenges is: ‘adversity brings new opportunities and challenges’.

In the domestic market, the greatest challenge to M&A activity is the ‘Seth’ sentiment which fails to distinguish between creating or running thriving businesses and hanging on to poor yielding physical assets. A seth prefers corporate death to selling the family silver.

Even in other cases, managements often sell a sinking business unit as a last resort. The advice given by experts at the M&A conference was: To clinch a better deal, sell while the going is good but the future outlook is not bright.

Yet there is an upcoming new breed of entrepreneurs who start a project with the intention of selling it at an appropriate time.

Such was the case of Tameer Microfinance Bank, according to its founder and ex-president. Abraaj Group bought K-Electric (formerly KESC) to turnaround the utility and sell it within a period of five years. It found a buyer — Shanghai Electric — after seven years. According to market reports, the Abraaj group has taken over a hospital in Karachi and is looking for acquisitions in other cities to establish a countrywide chain of hospitals.

On the external front especially in Europe and the US — Pakistan’s traditional sources of foreign investment — there a rising tide of protectionism.

France and the UK are persuading foreign investors not to quit their saturated markets and the US is preventing domestic companies from relocating their manufacturing facilities abroad in order to save local jobs.

The global movement of capital is being restricted.

But this does not mean the opportunity to adopt new ways of doing things with diversified sources of foreign investment, is past.

Published in Dawn, Business & Finance weekly, December 19th, 2016