Chinese interest in securing access to natural resources is expected to drive M&A activity in Latin America moving forward.

"The Chinese government seems to be focused on ensuring access to a variety of natural resources over the long term, and, as a consequence, Chinese companies will be focused on acquiring assets across the region that help achieve this objective," Roberto Maclean (pictured), an M&A expert and partner at Peruvian law firm Miranda & Amado, told research firm Transactional Track Record.

Maclean added that the liquidity generated in the region and in other parts of the world has encouraged the creation of private equity funds. Other sources of M&A activity could stem from large players looking to adopt a regional strategy through investment opportunities across Latin America.

"On the sell side, there are many businesses facing challenges, including mining and construction companies," said Maclean. "For this reason, I think that for the rest of the year and into 2018, in the case of Peru, the most active sectors will be: infrastructure, real­estate, agricultural and fisheries, natural resources, energy, education and healthcare.

"Looking at the regional radar, the most important deals by transaction value will be in the mining, energy, infrastructure and fisheries sectors," he added.

Acquisition financing in Peru

Maclean also discussed acquisition finance, noting the most commonly employed method of fundraising in Peru is through debt issuance, noting some alternative routes face challenges.

"The main obstacle, in the case of Peru, is the restriction on using assets of a purchased company to finance an acquisition," he said. "For this reason, financing acquisitions is easier when a company is purchased outright, or at least a very large majority stake with few minority shareholders, and without debt, or with very little debt, concentrated in the hands of one or only a few creditors."

Changes to the Peruvian law might alleviate the problem.

"Restrictions to financial assistance could be eliminated under some conditions while protecting minority shareholders from potential conflicts of interest that may arise," said Maclean. "This situation would be preferable to restricting such financing completely."

Miranda & Amado is a full­service firm with an international focus, specialized in handling highly sophisticated transactions for multinational clients.

Source: Business News Americas / BN Americas - Chile