Market Spotlight: Focus on M&A Direction in Latin America

By Alberto Santa Ana, Regional Director - LATAM

To read this article in Spanish, click here.

Like most regions, Latin America has been dramatically impacted by the continuing global pandemic. The healthcare crisis has affected consumer growth, but has also accelerated new FinTech opportunities. Plenty of lively topics for the second installment of our four-part M&A Momentum in the Americas series, “Dealmaking for a New Economic Landscape: M&A Momentum in LATAM.” Carlos Martinez, Senior LatAm Correspondent at Mergermarket, led an in-depth discussion with a panel of experts. Together, they discussed what they expect the rest of 2021 will mean for the Latin American economy—and for M&A in general. 

Jorge Planet Mira, Head of Latin America, Datasite, began the discussion by highlighting today’s positive market outlook. After a very flat December and January, transaction volumes spiked in February. Chile, Colombia, and Mexico saw numbers that were considerably higher than we saw last year. The market mood is high, and companies that had been on hiatus through the pandemic are coming to market. In an interactive poll, 74% of webinar participants said that they expected the volume of M&A transactions to increase. 

Ricardo Pérez Vas, Partner at RIóN M&A, observed that large regional private equity funds in particular are urgently seeking to make more deals. On the one hand, they have money that they have not been able to place, which will impact their future returns. At the same time, many had requested one- or two-year extensions in their terms of funds, which is putting additional pressure on them to accelerate deals. 

Multinationals reconsider strategies

The conversation moved on to a discussion of top multinational and multilatina companies that are reviewing their portfolios in the region. Francisco Garcia Naranjo, Partner at White & Case, noted that some large organizations have recently been divesting assets to enhance efficiencies and better target their operations. He pointed out that divestment of assets and businesses as integral business areas also implies very important challenges in terms of valuation. Francisco added that deal opportunities abound in Latin America for those with knowledge of the market, the regulatory environment, and other specific regional conditions.

How are SPACs impacting M&A?

SPACs continue to be a hot topic not only in the U.S. but around the world. Carlos asked the panel to provide some perspective on how these innovative vehicles will help shape M&A in Latin America. Francisco observed that although SPACs are booming in the U.S., Mexico is a different environment with diverse legal, governance, and market valuation issues that can make them more complex. However, he was also confident that SPACs are a compelling opportunity for dealmakers to take advantage of a broad region of versatile markets in Latin America. 

A focus on Fintech

The optimistic discussion turned to Fintech, which has been a bright spot in M&A activity this year. Carlos noted that dozens of Fintechs in Latin America have been raising capital, including Fairplay in Mexico, Nubi in Argentina, Finsocial in Colombia, and other innovators throughout the region. Jorge agreed that a considerable number of companies in Latin America are about to go public. He suggested that the pandemic has driven people to invest in technology, and changed the way they are operating, providing an extra push to these companies. 

When asked about the potential burden of regulations on Fintechs, Francisco found it positive that authorities have established a framework that ensures the stability of the system, considering that many unbanked people will utilize these non-traditional business alternatives.  He added that the regulatory burdens can encourage synergies between Fintech players and banking players, to offer a more dynamic variety of products. In a real-time webinar poll, 34% of participants believed that virtual payments offered by Fintech companies will likely have the most impact on the financial industry in Latin America, followed by mobile payments and peer-to-peer loans. 

Jorge expressed confidence that technology will continue to transform traditional businesses in sectors like Ed-Tech, Health-Tech, and Logi-Tech. Ricardo noted that in Colombia, almost 30% of total M&A transactions were related to technology companies. 

As the program concluded, participants agreed that plenty of strong M&A opportunities await for dealmakers throughout Latin America. If you’d like to take a deeper look into some of the perspectives shared at the webinar, a replay of the event is available for viewing (please note the presentation was recorded in Spanish).