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M&A in Latin America

Our comprehensive look at M&A trends in Latin America

For decades, Latin American countries have been a promising venue for global companies seeking to leverage the region’s rich natural resources, low-cost labor markets, and, more recently, expanding consumer markets.

M&A in Latin America activity in 2016-17 continued to remain weak, owing primarily to political instability, challenging macroeconomic conditions and falling commodity prices. Energy & Resources (~USD67 billion) industry attracted the highest investments in 2016-17 because of the abundance of natural resources in the region. Brazil witnessed the highest number of deals (923) and attracted significant investments (USD75 billion) driven mainly by its vast consumer base.

M&A trends in Latin America

  • M&A activity in Latin America remained subdued in 2016-17 primarily as a result of weak economic growth. Many of the Latin American countries are dependent on oil and gas and mining sector for growth. Therefore, weak oil and commodity markets have affected M&A activity in the region.1,2,3,4,5,6
  • Uncertainty over North American Free Trade Agreement (NAFTA) negotiations has adversely affected investor confidence in Mexico, especially in the manufacturing sector as Mexico exports over 80% of its goods to the US.7
  • Catastrophic floods in Peru led to a decline in local industrial activity and consumer demand affecting M&A activity in consumer facing sectors in the short term.8

Industries

  • Energy & Resources (E&R) industry observed the highest M&A activity in 2016-17 with ~USD67 billion in deal value. Ample reserves of oil and natural resources in the region, lower valuation of oil and gas assets resulting from decline in oil prices, government policies to promote renewable energy, and reforms in the mining sector could attract large investments in Latin America and drive M&A activity.1,3,9
  • The emerging middle class and vast domestic markets of Brazil and Mexico may drive M&A activity in consumer facing industries like Consumer and Industrial Products(C&IP) and Technology, Media, and Telecommunications (TMT).1,2

Geographies

  • In 2016-17, the majority of M&A activity in the region was intra-regional, with bigger economies, such as Brazil and Mexico, being top investors in the region.9
  • North America (especially the United States) and Europe (countries such as United Kingdom and Spain) have led cross-border M&A activity in Latin America as companies from these economies look to capture investment opportunities in developing markets.9

Challenges

  • Despite the government implementing reforms, weak macroeconomic conditions, overdependence on commodities for growth, and falling oil and commodity prices continue to negatively impact the M&A activity in Latin America.1,2,3,4,5,6
  • Political uncertainty owing to impending elections, insufficient infrastructure, rising inflation, and growing corruption, could affect investor investments and reduce M&A activity.1,2,3,4,5,6

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M&A trends in Latin America
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