M&A in Chile: Untouched by Turmoil

Unlike some of its neighboring countries, Chile's mergers and acquisitions (M&A) market has largely been unaffected by the political instability happening throughout the rest of the region. In 2021, deal flow has been consistent, presenting investors with opportunities in a variety of industries and transactional sizes.

Given the success of the COVID-19 vaccine rollout and the gradual reopening of the economy, dealmaking in Chile’s market has been able to bounce back from the slump that took place in 2020.

In fact, in the first three quarters of 2021, Chile has registered 246 deals — that’s more than a 45 percent increase from the same period last year. The year ahead appears to be no different: Many advisors continue to pitch and prepare transactions set to launch in H1 2022.

Potential headwinds

Right now, the M&A market is hot. The government's efforts to minimize the effects of the pandemic on the local economy have created high liquidity and low interest rates. By the end of the year, the GDP is expected to grow more than five percent. (For more insider detail on the outlook for LATAM, read the newly published SS&C Intralinks Deal Flow Predictor for Q1 2022. It's a highly accurate six-month forecast of M&A activity based on global deals in preparation or beginning due diligence.)

Chile also remains a top option for investors averse to high risk, or those looking for a long-term investment. Coupled with high demand and attractive assets, Chile has become a competitive market for those looking to expand both organically and inorganically.

Tech and Mining sectors surge

Following global trends, Tech has become an industry to watch. Venture capital (VC) funds like Softbank and Greenoaks are backing some of Chile's up-and-coming unicorns. Latin America (LATAM) has also become a hub for several Fintech companies. Energy and Infrastructure are consistently active sources of opportunity as well, specifically as the push to renewables and concerns over environmental, social and corporate governance (ESG) remain steady. 

Lastly, the rising price of copper has buoyed activity for both the Mining sector and (the anticipated) long-term demand for electric vehicle batteries.

Unlike our neighbors to the north and east, Chile has yet to join the initial public offering (IPO) boom. Factor in the VC investments over the last two years, however, and you see a lot of promise for the future.

Inflation is on the rise globally, and Chile has been affected. The rate reached 5.3 percent in the last month, and the forced sale of assets belonging to the national pension fund here is worth noting. While politics has yet to affect the market, it’s unclear what may happen here in the future. 

The mood among clients is eager. With lots of dry powder and favorable rates, investors are looking for the best and most interesting opportunities in the market. While capital remains available, I believe we will continue to see an active M&A market and alternative investment opportunities throughout 2022.