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M&A growth in Latin America outpaces all other markets  

09 July 2015

  • LatAm M&A increases by 29% over five years
  • Inbound acquisitions of LatAm companies by international investors up 54% and outbound acquisitions involving LatAm companies up 30% over five years

The growth in cross-border M&A activity involving Latin America* (LatAm) during the past five years (2010-2014) has increased by 9% in volume (4,856 deals) and by over 29% in value (approximately US$502bn) when compared to the previous five year period (2005-2009), outpacing that of the rest of the world, according to new research by global law firm Linklaters.

In contrast, the value of all global cross-border M&A activity decreased by 28% in value over the same two five year periods. Cross-border M&A value involving a LatAm company was also significantly higher than the next best performing region – Asia – which saw the value of transactions increase by 2%. All other major markets experienced a significant contraction in the collective value of transactions, including North America (-18%); Africa (-23%); Europe (-37%) and the Middle East (-50%) – see Table 1.

The study also found that from 2005-2009 to 2010-2014 the value of M&A deals where a LatAm company was the target, regardless of the global location of the seller and buyer, increased by approximately 54%. Similarly, the value of global M&A deals where a LatAm company was either the acquirer or seller increased by approximately 30% over the same time period.

Commenting on the findings, Alberto Luzárraga, Head of Linklaters’ São Paulo office and co-head of the firm’s LatAm practice, said:  “As more companies continue to expand their international presence, many are partnering with LatAm companies. Over the past two decades we have seen M&A activity involving Latin America mainly centred around the metals and mining, telecommunications, oil and gas and financial services sectors, with Brazil, Mexico and Argentina as the most active countries in the region. Internationally, the United States, Canada and the United Kingdom, have proven to be the biggest investors in the region.”

Looking Ahead

In spite of the volatile global economic landscape, in the last five years LatAm has emerged as one of the major contributors to a global M&A recovery. It remains to be seen how recent socio-political and economic challenges, including corruption scandals, slower economic growth, LatAm currency devaluation and continuing political uncertainty across several countries, will impact M&A activity in the region going forward.

“While we have seen a significant increase in M&A activity and deal value in LatAm, it is important to note that more than 20% of this cross-border activity over the past two decades has involved the commodities sector, which has suffered a huge fall since mid-2014,” added Luzárraga. “This sector plays a major role in the economy of the region, with iron ore and copper being two of the top exports for Brazil and Chile, and oil accounting for a large portion of Mexico’s and Colombia's exports as well. Global oil prices and demand will undoubtedly have a significant local impact on the future of region.”

Alongside oil and gas, the M&A market in LatAm will continue to largely be shaped by Brazil, one of the largest markets in the region. The study found that from 2005-2009 to 2010-2014 the value of M&A activity involving a Brazilian company as the target increased by almost 55%. While the country’s recent economic and political problems, largely stemming from bribery and corruption issues, have raised a number of concerns, its depreciated currency may command attractive asset valuations which, in turn, may continue to make investment in Brazil attractive for foreign buyers.

“Latin America has proven its M&A resilience in the past, most recently by coming out of the 2009 global financial crisis maintaining its investor appeal relatively intact. While there are undoubtedly a number of economic, social and political challenges currently facing the region, there is still the sense that we will see continued growth in the M&A market in the coming years,” Luzárraga continued.

Outside of the commodities space, there are a number of sectors that have played, and are expected to continue to play, an important part in the region’s economy and business activity and that are likely to feature high in investor targeting plans. In particular, those sectors significantly impacted by the overall improvement in living conditions across LatAm, as well as those benefitting from the growth of the middle classes affecting the majority of countries in the region, may prove to be catalysts of future deal flow.

“With a greater and growing proportion of Latin America’s large and increasingly aging population able to afford improved care compared to the not too distant past, we expect to see the healthcare, insurance and pharmaceuticals sectors grow further. They have already been the focus of sustained deal making and opportunities for consolidation remain strong and are likely to attract further interest from investors going forward,” added Luzárraga.

Notes to Editors:

* Latin American involvement is determined by the presence of at least one Latin American company (as purchaser, seller or target) within an M&A transaction.

Source: Thomson Reuters

Table 1: Volume and Value Growth by Geography

Region

M&A (Deal Value) % Change 2005-09 to 2010-14

M&A (Deal Volume) % Change 2005-09 to 2010-14

Latin America

+29%

+9%

Asia Pacific

+2%

-12%

North America

-18%

-9%

Africa

-23%

-7%

Europe

-37%

-14%

Middle East

-50%

-6%

 

About Linklaters in Latin America

As one of the leading global law firms with more than 2,600 lawyers across 20 countries, Linklaters undertakes the most important and challenging assignments for the world's leading companies, financial institutions and governments. Our focus is on consistently delivering integrated, global solutions, helping clients to achieve their objectives by solving their most complex and important legal issues. 

Linklaters’ was one of the first international firms to open an office in Brazil in 1997. We have dedicated lawyers across the firm who frequently work in countries such as Mexico, Chile, Peru, Argentina, Colombia, Venezuela, Bolivia and Ecuador, advising governments, major multinationals and global financial institutions on significant corporate and finance transactions and on energy, natural resources and infrastructure projects throughout the region. We offer fully-fledged finance capabilities throughout Latin America, covering all kinds of M&A (Latin American inbound and outbound, cross-border, intra-LatAm), capital markets (including equity, debt and liability management), banking (including export credit facilities, secured and unsecured facilities, bilateral and syndicated financings, margin loans, sale & lease-backs, acquisition financing, structured loans, and sovereign and government owned enterprise loans), project finance, dispute resolution and governance matters. 

For more information please contact Martha McInnis at 212-830-9639

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