M&A in Latin America

The M&A activity in Latin America in 2017-18 was driven by the improving macroeconomic conditions, rising government support, and increasing consumption. The Energy, Resources & Industrials industry attracted significant investments (USD 84 bn)¹ in 2017-18 because of the abundance of natural resources in the region. Brazil witnessed the highest number of deals (752)¹ and accounted for significant investments (USD 83bn)¹ owing to its reviving economy and vast consumer base.

M&A trends in Latin America

• In 2017, the M&A activity in Latin America was driven by its improving economic growth and rising consumption. Rich natural resources, increasing disposable income, and government reforms further stimulated M&A activity in the region.^{1- 6}
• Brazil’s growing GDP, increasing consumer spending, and business-friendly policies helped boost investor confidence, thus, attracting investments.²
• Mexico’s rising GDP growth, low wages, a relatively skilled workforce, and deep integration into the US value chain encouraged investment in this region.¹
• The CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership) may facilitate the M&A activity in Latin America. ^1-6

Industries

• Over 2017-18, Energy, Resources & Industrials (ER&I) registered the highest M&A activity (deals worth ~USD 84 bn).¹
• Consumer (CNSR) recorded deals worth ~USD 25 bn over 2017-18, owing to a rise in the disposable income.¹
• M&A in Financial Services was primarily driven by the growth in the insurance sector. A deal worth USD15 billion was announced between XL group Ltd and AXA SA in this sector on May, 2018.¹
• Growth in Technology, Media, and Telecommunications (TMT) was mainly attributable to a rise in IT consulting services.¹
• The Life Science Healthcare sector is expected to be benefited by The CPTPP due to reduction of trade and regulation barriers.¹¹

Geographies

• In 2017-18, the majority of M&A activity in Latin America was intra-regional, with economies such as Brazil, the United States, and Mexico being the top investors, whereas, Brazil, Mexico, and Chile were top investor destinations.¹
• Outside the region, North America (especially the United States) and Europe (countries such as France and Spain) were the top investors in Latin America’s inter-regional deals.¹

Challenges

• Overdependence on commodities, and volatile oil and commodity prices could restrain the M&A activity in Latin America.^{1- 6}
• Political uncertainties, corruption, and the lack of adequate infrastructure could also weaken market perception, thus, affecting the M&A activity.^{1- 6}
• Uncertainty in decisions related to the NAFTA agreement may hamper investors’ confidence.^1-6
  

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