Contents

Introduction

Mergers and acquisitions (M&A) slowed during the first part of the year in Latin America, although analysts indicate that this will likely be a temporary slowdown. The uncertainties caused by the upcoming presidential elections in Mexico and Brazil, added to the economic instability in Argentina, have had an impact on the progress of transactions in the three main economies of the region in terms of GDP.

According to a Transactional Track Record (TTR) report, Latin America saw a 12.4% fall in January-April in M&As compared to the same period of 2017. However, analysts predict that this scenario will change once some of the political and economic questions begin to dissipate. In fact, four out of five negotiators expect merger and acquisition activity in Latin America to increase in 2018, according to a study by consultancy Baker McKenzie published in January.

The factors driving these favorable expectations are the same ones that have been stimulating transactions between 2015 and 2017: macroeconomic stability, the increase in the size of the middle class in Latin America, the increase in consumption and growing urbanization, coupled with a general trend to privatization and undervalued assets after a long economic slump.

"The sectors that are going to boost transactions this year will be infrastructure and oil and gas," says Wagner Marques Rodrigues, director of research and business intelligence at TTR. "Everything related to consumption will also grow due to the expansion of the middle class, and that growth includes the financial sector."

The insurance sector is also set to see action. Insurance penetration in Latin America is equivalent to about 3% of GDP - less than half the rate in the most developed countries - but this figure will keep growing with the rise of more people to the middle income strata. In addition, insurers have benefited from participating in large infrastructure projects, such as the 4G program of highways in Colombia. In this favorable framework for the sector, in the first quarter firms such as Zurich, Fidelidade (the largest insurer in Portugal) and China's CMIG International, among other companies, announced the purchase of assets in the region.

In this report we will describe the main trends for mergers and acquisitions in Latin America. In addition, we will identify the evolution and outlook for M&A activity in Brazil, Mexico, Chile, Argentina, Peru and Colombia.

Figure: M&A in Latin America

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