Tank Terminal Due Diligence In Emerging Markets

When an investor wants to buy tank storage assets, which can be appealing and reliable revenue-making infrastructure assets, commercial and technical tank terminal due diligence is done.

Location is the first significant factor in driving the value of storage assets. We need to evaluate the region in which the terminal is operating and distinguish assets between sea and inland terminals. Secondly, we need to review the commodities handled at the terminal. Petroleum and chemical markets have very different dynamics, both in profitability, operations, and safety. The third factor is the terminal function, which could be a logistics hub, trading platform, or strategic storage.

This article is written by Rudi Stalmans and featured in the 2019 winter edition of both Tank News International and Storage Terminals Magazine.


Analyzing these factors will provide valuable insights into the business and related risks of the targeted tank storage assets.

However, in emerging markets, where volatile economies, changing political landscapes, vague regulations, and the absence of good infrastructure and technology are often present, companies face a harder decision when investing in tank terminal assets. Companies need to be aware of these complexities and have access to expert knowledge before making investment decisions.

Evaluating assets in emerging markets

Investors have to understand that cultural differences play a prime role in the success or failure of a project in a new market. Western companies have often failed in developing markets due to a very different business environment compared to the West. Cultural misunderstandings arising from miscommunication can be a big challenge, for example. Imagine the impact of potential differences in safety culture and approach to the safety case. Two people mastering the same language could face difficulties understanding each other due to cultural and behavior differences. Communication often goes effortless in the beginning but can quickly become challenging as discussions and topics get more complex.

One word you will hear while doing business in China is guanxi. In English, the word could stand for relationship. For a Western company to succeed in China, it is important to spend time cultivating relationships with not only the business community but also with government departments and trade associations. In the tank storage business in China, for example, location, services as well as guanxi are all important in developing your business.

Companies operating in a foreign market should also adapt to the local laws and legal requirements. Having knowledge about the legal environment in the country where a company wants to operate is extremely important.

Politics play another significant role. A government that tends to change rules and regulations frequently as society develops could impact a company’s business strategy. China used to welcome companies in the chemical sector with open arms, but today this is less the case with many sites being asked to relocate or close down. Also, simple administrative tasks in emerging markets can often be time-consuming.

The quality of assets and available technology is another focus point. An investor must be well informed about the technical specifications of the terminal, the available technology, and the operational and commercial skills of the operator.

Tank farms want to make a nice profit, so finally, a good understanding of the business environment and economic policies will guide investors to decide if they can compete in the market or not.

Conclusion: tank terminal due diligence for successful decisions

The tank terminal market has seen a lot of Mergers & Acquisitions in recent times. Many funds have increased their interest in the industry and often became the winners of tank terminal bids. These investors need to carefully consider if a tank terminal is a valuable asset and is going to diversify their investment portfolio.

In general, due diligence is the careful examination to take before entering into an agreement with another party, or an act with a certain standard of care. Although this could be a legal requirement, in most cases, it is a voluntary examination.

During the due diligence process, it is important to investigate and find data and enhance the amount and quality of the information available to decision-makers. At the same time, it is equally important to use all findings at hand efficiently in the decision-making process.

Evaluating tank terminal assets in emerging markets should be done by breaking down the locational, market segment, and functional features of the assets, together with a review of the social, cultural, legal, economic, political, technological, and technical environment.

You may also like our article – The Role Of Singapore & Ulsan In The Liquid Bulk Chemical Sector.


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