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The M&A market in Latin America

06 November 2017
Andres Willa

Fewer deals, more spending

The number of deals in Latin America in 2016 fell for the fourth consecutive year to 549, down 8.5% from the previous year. Yet market value stepped forward 9% year-on-year to US$84bn, thanks especially to select mammoth acquisitions by foreign players.

Foreign interest

The value of deals led by bidders based outside Latin America in 2016 grew by 46% against the previous year to US$54.5bn, as weaker currencies in Brazil and Argentina spurred outside interest from buyers based in Europe, Asia and North America.  These figures suggest foreign buyers chose targets carefully in a negative growth environment however, with the number of inbound deals dropping by 12%.

Home-grown renewal?

Respondents unanimously predict that Latin American firms will play a larger role in acquisitions going forward, both within the region and farther afield. In addition to highly developed markets, they’ll be hunting for deals in Eastern Europe and in Africa, respondents say.

Energy and resources

The energy, mining and utilities sectors' US$43bn deal volume accounted for just over half of M&A market value in the region, rising in absolute and relative terms from 2015, when the sectors' US$24bn made up less than a third of activity. Survey results suggest consumer, infrastructure and telecommunications sectors will be more prominent going forward. Meanwhile, respondents say lower-for-longer oil prices would steer dealmaking away from Brazil and Argentina, towards Chile and Mexico


Investors in Latin America took careful aim in 2016, targeting fewer deals but spending more than the previous year amid cautiously optimistic forecasts that the worst of the region’s economic woes may be over. The overall number of deals declined for the fourth consecutive year to 549, although the total volume expressed in dollar terms recovered 9% to US$84bn. That higher value, however, still represents a stark decline from a recent relative peak in 2014, when 623 deals yielded a combined US$131.2bn.

Brazil, the region’s largest M&A market, singlehandedly accounted for the lion’s share of the value increase for 2016, rising 64% year-on-year to US$52.8bn as oil prices rebounded from early lows, energy firms divested assets and economists predicted the country’s punishing recession would give way to fragile growth in 2017.

That made Brazil solely responsible for more than half of the total M&A transactional value for Latin America in 2016. Yet the number of deals in Brazil declined by over 15% to 269, compared with 318 deals in 2015. The impeachment of Brazilian President Dilma Rousseff in August began to reassure some investors that the country’s political storms were passing — until her successor, Michel Temer, became embroiled in a political scandal of his own, facing calls to resign amid bribery accusations and placing the country’s political future back on shaky ground.

Argentina was another high achiever in 2016, witnessing an almost five-fold increase in deal volume to US$5.2bn, along with a bump in the number of deals to 41 compared to 29 the year before.  This increase suggests that the business-friendly reforms of Argentinian President Mauricio Macri, who loosened capital controls and settled a dispute with his country’s bondholders, are paying dividends.

Mexico, however, bucked the regional trend of fewer, larger deals, with a higher number of transactions (rising to 90 from 85 year-on-year) but a lower total value (US$6.1bn in 2016 versus US$17.8bn in 2015). That change alone accounted for the bulk of the overall reduction in the market value of deals in Central America to US$6.3bn from US$20bn the previous year.

Expectations for growth in Mexico deteriorated from mid-2016. This was due, in part, to slackening demand and significant policy uncertainty in the U.S., where businessman Donald Trump rode to the presidency on a pledge to reorder trade policy to America’s advantage. The rise in market value of Latin American dealmaking reflected in the data is largely due to spending by acquirers from beyond Latin America’s borders, especially in Europe, Asia-Pacific and the U.S.  Inbound interregional market volume rose to US$54.5bn in 2016 from US$37.3bn the year before, as currency depreciation in Brazil and Argentina attracted buyers. Indeed, the region continued to suffer economically as Brazil, Argentina, Ecuador, Venezuela and Belize all endured painful recessions.

But looking forward, the World Bank and the International Monetary Fund (IMF) both predict that two years of economic contraction in Latin America will come to an end with a return to modest growth in 2017. 

According to the World Bank’s January 2017 forecast, combined real Gross Domestic Product (GDP) in Latin America and the Caribbean could rise 1.2% over the following year, and that the pace of growth would accelerate to 2.6% annually by 2019. The region’s economy contracted by 0.6% in 2015 and by 1.4% in 2016.


A majority of respondents (64%) expect overall Latin American M&A activity to increase over the next 12 months, a sentiment that dovetails with economists’ forecasts for a return to regional economic expansion in 2017.

Yet optimism is restrained. Only a slim fraction (6%) of respondents expect this increase to be significant, while 58% foresee a more moderate rise.

Overall economic conditions across the Latin American region have improved,” says the head of corporate development at a firm based in Mexico. “This has increased public spending, which is a growth sign for the consumer sector as well as for the technology industry.


Yet the region still faces risks from a potential deterioration of commodities prices and international political uncertainty. The price of oil, an export vital to many Latin American economies, plunged in the opening days of 2016 before staging a recovery. Crude oil plummeted below US$30 per barrel but rebounded to US$40-US$50 per barrel for much of 2016.

  • What do you expect to happen to the level of activity regarding the following types of deals over the next 12 months?

Politics, at home and abroad, is another wild card, and may prompt potential buyers to wait for clarity.

U.S. President Trump’s protectionist rhetoric has caused ripples of uncertainty throughout the region, especially in Mexico, where news of Trump’s victory in November hammered the Mexican peso. Trump’s plans to increase spending on infrastructure and cut taxes have also heightened concerns about higher borrowing costs in the future.

Those factors, along with uncertainty about energy prices and the fragility of the economy, pose threats to the region’s financial recovery in the year ahead. “Latin America too has been affected by the global crises,” says the managing director of a Brazilian investment bank. “All the major economies here are bracing for a slowdown and are not able to keep up to the growth expectations. We cannot expect M&A to increase at a time when this uncertainty is expected to continue.


In 2016, investors from outside Latin America spent US$54.5bn on regional assets, 46% more than the previous year, according to Mergermarket data.  But in 2017, respondents are more bullish about the prospects for home-grown acquirers than they are about interest from outside the region.

Respondents unanimously said intraregional M&A will rise over the next 12 months, and a majority (52%) predict the rise will be significant. The remainder (48%) said M&A activity by Latin American-based companies buying within the region will increase somewhat.

Latin America countries "will be more comfortable with doing M&A regionally,” the managing director of one investment bank says. “They understand the regional market better and are well aligned with each other. The chances of success in M&A are much higher for them. International players will reduce their outreach in Latin America because of the uncertain environment ."


The vast majority of respondents have a positive perception of the impact Argentinian President Mauricio Macri is having on the M&A market in his country

  • What kind of impact has the new government led by Mauricio Macri had on the M&A market in Argentina?

A change in regulations "has been very favorable for companies,” one executive says. “With the new administration in place, we expect conditions in the market to improve significantly. This will help boost the M&A market.”

There are some vocal dissenters, however: “Capital — or, rather, the lack of capital — is a major problem in our market,” says one director of strategy for a Latin American company. “We need the government to control inflation and interest rates. But neither of those is changing for the better. We are not very certain that the current government can effectively tackle the problems facing our economy.”

Argentina’s moves to lift capital controls are seen by a plurality of respondents as the singlemost important initiative of the country’s reform agenda led by President Macri, who has dismantled most of the country’s currency controls since taking office in December 2015.

The Argentinian government needs to remove capital controls to help the market grow,” one respondent says. “Capital markets are extremely regulated and this leads to a lot of difficult problems.”

Yet a significant minority of respondents say Macri’s key accomplishment has been resolving the country’s dispute with bondholders, allowing Argentina to regain access to global debt markets. Others point to the overhaul of state statistical agencies to provide better economic data to market players.

Macri has also packed his cabinet with businessmen and technocrats, cut taxes and announced new investments in shale oil — all in the name of kickstarting the country’s economy. The World Bank, which estimates Argentina’s economy contracted by 2.3% in 2016, also forecast growth of approximately 3% annually from 2017 to 2019.

The largest challenge facing the Argentinian business environment over the next year will be domestic resistance to austerity measures, according to two thirds of respondents. Respondents also named near-term economic contraction and stifling government regulation and bureaucracy as significant hurdles.  ” The biggest problems that Argentinian businesses will have to manage is to remain active in an environment where the rules and regulations are getting stricter,” one respondent says. “We expect there to be an increase in austerity measures as the country is expected to default. Inflation has also plagued the market . The country is relatively new to the bond market and because of this investors are skeptical,” says a managing director overseeing M&A at an investment bank. “We also expect a period of austerity measures, which we expect to become stricter and more difficult going forward.

Which of the following has been/will be the most important reform made by the new Argentine government?

  • 34% Removal of capital controls
  • 26% Deal struck for debt restructuring and repayment
  • 26% Overhaul of government statistics agency
  • 14% Appointment of technocratic cabinet

What will be the biggest challenges to Argentina’s business environment in the next 12 months?

  1. 64% Domestic resistance to austerity measures
  2. 44% Anticipated economic contraction in the short term
  3. 30% Excessive government regulation and bureaucracy
  4. 22% Relative newness to the bond markets
  5. 22% High inflation
  6. 18% Drop in the value of the Argentine peso due to release of capital controls



2016 brought economic pain and political turmoil in Latin America — not least to Brazil, the region’s biggest economy and top M&A market.  But the seas may be calming in 2017 as new administrations chart courses ahead in Argentina and Peru, and the regional economy begins to expand.

Respondents say commodity price swings will help determine the type and geography of deals, with higher prices favoring Brazil and Argentina, and lower prices favoring Mexico and Chile.  Consumer, infrastructure and telecommunications are seen as hot sectors of the future. The results suggest Chile is a country to watch going forward, with potential for growth in M&A and private equity transactions. Meanwhile, reform in Argentina seems to be showing results.  Mexico’s fortunes are tied up in yet-to-be-resolved questions about its changing relationship with the U.S. Respondents hotly anticipate a rise in activity among Latin America- based bidders.

For more information, contact:

Andres Willa, managing partner

Estudia Willa 

La Pampa 1517 Piso 1° A, (C1428DZE) Buenos Aires, Argentina

t: +59 11 4783 4892


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