M&A in Latin America: A Look Back and Ahead
Here’s a glimpse into future announced M&A volume in Latin America, as prognosticated by the quarterly Intralinks’ Deal Flow Predictor (DFP) report.
10 March 2015
I recently had the pleasure of presenting at one of The Colombian Association of Private Equity Funds’ (ColCapital) private events, hosted by law firm, Philippi Prietocarrizosa & Uria, Carrera, in Bogota.
ColCapital, is a prominent organization that brings together Colombia’s private equity professionals and venture capitalists with the goal of promoting the development of the Colombian private equity market and spurring M&A growth. Around 50 or so ColCapital members were present from a variety of corporations, private equity groups, and advisory houses. Aside from networking and relationship-building, the event presented attendees with a glimpse into future announced M&A volume in the region, as prognosticated by the quarterly Intralinks Deal Flow Predictor (DFP) report. Additionally, I had the opportunity to update the audience on the growing footprint of our online deal sourcing network, Intralinks Dealnexus, throughout Latin America, including the number of member strategic and financial acquirers worldwide looking to do deals in the region, which happens to be just north of 500.
Looking Back: M&A in 2014
To bring you up to speed, let’s take a walk down memory lane and look back at the year that was M&A in 2014. To put it simply, last year was the renaissance dealmakers have been waiting for. To begin with, overall announced deal volume increased 12.5% versus 2013. In parallel, the total value of announced deals increased 45% over the same period, driven predominantly by a sharp increase in transactions larger than USD $5 billion in value (approximately 80 in total), plus an overall 28% increase in average deal value across the board. Most impressively, at USD $3.5 trillion, the total value of announced deals in 2014 hit its highest level since 2007, and marked the first year since 2010 that saw both significant growth in deal volume and deal value. Based on the findings of the most recent Intralinks DFP report, we are optimistic that this dealmaking momentum will carry forward into 1H 2015.
In Latin America specifically, 2014 was a challenging year, with overall announced M&A volume decreasing approximately 33% versus 2013. Driving the downturn were Latin America’s largest economies, Brazil and Mexico, which were particularly afflicted by the end of the commodity super cycle, general economic malaise, and continued geopolitical and social unrest. The fallout of the Petrobras corruption scandal in Brazil could continue to play an impactful role, now that talk of possible impeachment proceedings against President Dilma Rousseff — however unlikely — have made their way into the mainstream discussion.
Looking Ahead: M&A in 1H 2015
After sharing some key trends in 2014 with the audience at the ColCapital event, I was excited to reveal future insights about the global M&A market and the Latin America landscape based on the results of the latest Intralinks DFP report, an independently verified unique leading indicator of global early-stage M&A activity. You can learn more about the Intralinks DFP here.
The recent Intralinks DFP report, which provides insights through Q2 2015, shows a 1 percent quarter-over-quarter (QoQ) and a 12 percent YoY increase in early-stage M&A activity globally. Early-stage M&A activity increased overall YoY in the North America, Europe, Middle East and Africa, and Asia Pacific regions, but decreased in the Latin America region. The Latin America dealmaking environment still shows signs of weakness, with a 17 percent decline in early-stage M&A activity YoY. Brazil and Mexico, Latin America’s two largest economies, are still recovering from sharp decreases in prices for key exports considering the end of the commodity price super-cycle (fueled by Chinese industrialization) and continued political and social unrest. Further in the Andean Region, the outlook is modest, due to the general economic slowdown in Peru and Chile given the downward pressure on commodities prices. On the bright side, dealmakers can be optimistic about Colombia. The market’s robust GDP growth (averaging 4.4% between 2015 and 2019) and positive outbound M&A growth from Colombian conglomerates appeals to growth-focused investors.
Even though the Latin America market shows signs of weakness, global M&A overall should remain strong for the first half of this year. Based on the results of the latest Intralinks DFP, Intralinks expects the volume of global announced deals in 1H 2015 to exceed that of 1H 2014. For more predictions and data, you can access the full report on Intralinks’ website.
Innovative M&A Tools
Over the course of many conversations with our contacts and customers, we’ve learned that without the help of technology, the M&A process can be long and painful. From deal marketing to sourcing, to qualifying leads to managing the due diligence process and closing the deal, time is always of the essence and secured communications and collaboration are key to safeguarding client anonymity and deal confidentiality.
In today’s age, it’s crucial to have effective technology in place to manage the M&A process more efficiently and securely — and to save time most of us don’t have. For these reasons, I was thrilled to share our vision of — and progress toward — managing the complete deal lifecycle with the ColCapital group. With Intralinks, you can manage all of your buy-side and sell-side opportunities with ease at any stage of the deal, on any device. From using Intralinks VIA to collaborate effortlessly but securely to prepare a deal to go to market, to finding and engaging the perfect buyers/investors for that deal using Intralinks Dealnexus’ pristine online deal sourcing network, to due diligence and closing deal using Intralinks’ award-winning virtual data room, Intralinks has it all, and our solutions are built to help keep your processes and communications clear, secure, and streamlined at any stage of the deal lifecycle.
Tony Hill is the Director of Intralinks Dealnexus. Prior to its acquisition by Intralinks in early 2013 along with MergerID, Tony was the CEO and co-founder of PE-Nexus, the leading private market network for mergers & acquisitions professionals. The two platforms have been combined to form the largest global deal marketplace and professional network for qualified M&A professionals.