Harnessing the power of data in M&A

May 19, 2022 | Case Study

Harnessing the power of data in M&A

Bruno Amaral, Partner & Head of M&A São Paulo

BTG Pactual is a Brazilian financial company that operates in the markets of investment banking, wealth management and asset management. It offers advisory services in M&A, wealth planning, loans and financings, as well as investment solutions and market analyses.

The Cross-Country Regulation Challenge

Latin America is a region that offers big risks and rewards for local and overseas acquirers. Understanding how and why these risks and rewards vary across the region’s economies is an important first step in being able to identify investment opportunities that are worth pursuing and, just as importantly, those that are not.

“Even within LatAm it is not easy, for instance, for a Chilean buyer to quickly understand tax legislation in Brazil, or for a Brazilian buyer to understand foreign exchange rules in Argentina,” says Bruno Amaral, partner and head of M&A at São Paulo headquartered investment bank BTG Pactual. “Advisors have a key role in helping their clients navigate through these issues when making their long-term investment decisions.”

Sector Bright Spots in a Challenging Environment

As elsewhere, the coronavirus crisis has hit M&A activity hard in the region, with announced deal volumes falling 30% during the first quarter; suppressed activity that has extended to the end of June. There are, however, signs activity will pick-up again in the coming months, driven by, for instance, companies in the natural resources sector potentially merging or selling-off non-core operations in response to a languishing oil price, and private equity firms that have substantial amounts of capital to deploy across the region.

The New Role of Technology

In the meantime, Amaral says for those acquirers and advisors that are proceeding with deals, video conferencing has become the go-to means to facilitate negotiations, and virtual data rooms have, for the speed, efficiency and security they offer, taken on greater importance in the due diligence phase.

Longer term, Amaral believes technology, particularly its application in helping to analyze data, could help transform the dealmaking process, especially in helping acquirers better identify investment opportunities and assess risks, thereby potentially increasing likelihood of deal completion. This is important in a region where there is a higher degree of execution risk due to a lack of publicly available information on companies.

“Data is the new oil, and I believe we are only in the beginning stages of how technology will allow us to use data in a more efficient and assertive way, particularly in screening new deals, due diligence and valuation,” says Amaral. Advisors and their clients are still learning about all the digital tools currently available to them, but Amaral says there are specific examples of where big data, for instance, has facilitated dealmaking.

“Transactions, such as tender offers, benefit from real-time monitoring of investor reactions to transaction terms,” he says. “Big data analysis also helps in modelling businesses such as utilities, concessions, oil and gas, technology, among others.”

For Amaral, technology has a critical role to play in transforming the M&A process in the region, as elsewhere. But he says as much as the coronavirus has accelerated digitalization, and virtual deal execution, technology is no replacement for the experience and expertise advisors provide in and across developing economic regions.

“In Latin America,” he says. “The economic, regulatory and legal environment changes more frequently than in developed markets, so there’s no substitute for having on-the-ground advisors who can help clients assess the opportunities and risks of a particular investment and consider the latest developments in each of the markets in the region.”