Latin America’s M&A Market is Booming

This year, Latin America (LATAM) started with a YOY uptick in mergers and acquisitions (M&A), with a healthy pipeline from the middle-market to the larger players in the region. The appetite for equity fueled by low interest rates created high activity for capital markets. Rising interest rates, however, may affect that trend and could affect initial public offerings (IPOs) in the region.

Dealmaking that had been put on hold at the start of the global COVID-19 crisis has resumed and pandemic recovery measures have been pushing deal numbers up. Larger transactions are coming to fruition across a mix of sectors and deal sizes. Some distressed assets are still looking for the right path, considering the lingering pandemic and market uncertainties.

Putting dry power to work

LATAM has had a historic amount of capital available to entrepreneurs, with huge sums of cash going to venture capital and private equity (PE). More than USD five billion were invested in LATAM startups in H1 — a record year so far— with a 299 percent YoY increase of cash flow compared to 2020.  Brazil had four new unicorns (MadeiraMadeira, Hotmart, C6 Bank and Mercado Bitcoin), a huge accomplishment to the region due to high valuations.  

We’ve also seen stratospheric growth in e-commerce, making Retail worthy of watching into the next quarter. Agriculture, a main economic driver of the Brazilian economy, has been positively impacted by the depreciated exchange rate (BRL) on Agribusiness companies. Technology and the global reliance on it caused during the pandemic will continue to prevail as well.

IPOs in LATAM, which are concentrated in Brazil, has had a record year to date, raising more than USD 11 billion (BRL 57 billion) through 42 listings. Due to inflation in Brazil, though, we don’t expect the IPO hype to continue. There are indications the IPO market has become saturated and will decline soon.

Potential headwinds 

Despite surges, LATAM has its post-pandemic challenges. M&A operations have changed. Due diligence and in-person site visits have become more difficult, especially with the interruption of the operation of certain public agencies or operations during restricted hours. New measures and laws here also make it more necessary to assess compliance. Tools for setting up virtual data rooms have become much more necessary.

All in all, the mood is a hopeful one, with positive news on all fronts. The global growth in M&A has dealmakers here excited. Making bold predictions and taking risks is paying off and some unexpected deals have come to fruition. Going forward, we may see some sectors such as Tech and Healthcare consolidating and driving innovation in the marketplace.

You can see the full picture on LATAM is in the newly published SS&C Intralinks Deal Flow Predictor for Q4 2021 — independently verified as a highly accurate six-month forecast of M&A activity by tracking early-stage transactions globally that are in preparation or have begun due diligence.