The LatAm M&A landscape: Gradual rise in deals on the horizon

Mergers and acquisitions across Latin America will likely remain tepid this year amid the region's persistent economic and political headwinds, although the outlook should improve in the second half.

There were 3,452 M&A transactions in the region in 2022, down 11% from 2021, reaching a declared financial value of U$97.9bn, down 42%, according to a report prepared by UK insurance and reinsurance broker Aon, Datasite and TTR Data.

While Brazil was the most active country in the region with 2,387 M&A transactions last year, its volume dropped 12% and transaction values declined 49% to US$57bn.

In second place was Mexico, with 422 transactions (+1%), with a declared value of US$16bn (-17%), followed by Chile with 314 transactions (-2%) and US$14.7bn in capital invested (-17%) and Colombia, with 266 transactions (+6%) and US$10bn (-20%).

Felipe Junqueira, head of M&A and transaction solutions leader for Latin America at Aon, talks with BNamericas about the market trends.

BNamericas: What is the outlook for the volume of M&A operations in Latin America this year?

Junqueira: Last year we saw a reduction in the number of operations and also in the financial volume of M&As.

I think that if we look at 2023, the downward trend will continue for part of the year, but operations will tend to gain traction over the months and we'll see them start to pick up over time.

What explains the reduction we had in operations last year and the still-challenging scenario at the beginning of this year is the high interest rates, inflation pressures and also the associated effects of the Russian war in Ukraine, which has had impacts on several supply chains and in the energy sector.

In addition, there are political events in the region that impact M&A operations, such as political tensions in Peru and the change of the federal government in Brazil. Whenever there's a change of government, regardless of the party or political bias, there's an accommodation in activity until economic agents better understand the strategy of the new government.

With the reduction of uncertainties in Brazil regarding the change of government, I think there will be a gradual increase in transactions over the next few months.

BNamericas: Which countries are likely to be the most important in terms of M&A operations this year?

Junqueira: Historically, Brazil is the most important country in the region in terms of the volume of operations and that will continue because the difference in transactions is quite large.

In second place we always see a battle between Mexico, Colombia and Chile, followed by Peru and Argentina, and that trend looks likely to continue.

BNamericas: In terms of sectors, which ones will tend to see the most M&A activity?

Junqueira: Technology has been the sector that generates the most transactions, of various types and sizes as well, and that will continue, since even companies from other sectors sometimes buy technology firms to meet their needs.

The infrastructure and energy sectors also stand out, mainly in the area of renewable energy.

BNamericas: What are the main risks associated with M&A operations at present?

Junqueira: Here at Aon, we offer solutions for transactions, focusing on insurance solutions to improve business conditions.

I see that risks related to cyberattacks have gained importance in transactions, while companies are increasingly mapping out risks related to intellectual property rights.

BNamericas: Are such risks associated with the increasingly technological models adopted by companies?

Junqueira: When we talk about the old economy, we're talking about risks associated with an industrial plant, risks within a distribution center. Now, we're seeing more and more businesses transferring to the digital world and this makes aspects related to intellectual property more important and that's an area where we offer a lot of business solutions.

In general, the search for insurance for M&A activities is growing strongly in the region and this makes operations possible. We've been trying to help the development of the market more with our expertise, with market solutions.