Dealmaking picked up in Chile last year, as the energy, technology, real estate and services sectors continued to demonstrate resilience. 

The country registered 384 transactions, up 14.6% on 2022, with disclosed value climbing 1.96% to US$15.0bn, according to a report from research firm TTR Data.

M&A transactions accounted for 166 deals and US$11.2bn, followed by venture capital (159 and US$1.63bn), asset acquisition (38 and US$759mn) and private equity (21 and US$1.41bn).

Among drivers in the inbound acquisition segment were internet/software/IT, professional services, real estate, metal/mineral resources, banking/investment and renewable energy. Since 2010, US firms have been the most acquisitive in the Chilean market. 

Dealmaking was impacted by domestic economic uncertainty, compounded by global interest rate hikes and inflation, “which directly affects the value offered for M&A assets and leads to reduced market activity,” TTR Data spokesperson Marcela Chacón told BNamericas.

The Chilean economy is estimated to have registered zero growth in 2023, a year when inflation began trending down after spiking in 2022 and a monetary easing cycle got underway. The economic outlook for 2024 is brighter.

The major dealmaking challenges for Chile and the rest of the region, Chacón said, are “political and economic stability and predictability so that an improvement is seen in the short and medium term.”

She added: “While there are some incomparable advantages regarding sectors related to energy, services and technology, among others, if an optimistic dynamic is desired in general terms in the transactional market, Chile must offer an adequate and competitive environment for activity to get back on track.”

In terms of political stability, uncertainty over potential changes to rules of the game has eased after the second proposal for a new constitution was voted down, nudging the issue of reform into the long grass for now.

Chilean financial advisors Hudson Bankers, in a December 2023 report on dealmaking in the Andean region – defined as Chile, Peru and Colombia – was upbeat.

Hudson Bankers said that, while 2023 marked a 10-year low in M&A deals, the year ended on a high note and that the outlook for 2024 was promising: “General expectation for the upcoming year suggests that dealflow may increase even further, as countries in the Andean region show signs of economic recovery, strengthening investors' confidence.”

According to the Chilean central bank’s latest monetary policy report, the economy is forecast to grow 1.25-2.25% this year. Annual inflation is expected to hit the bank’s sweet spot of 3% in 2H24, while under a base scenario the benchmark interest rate should continue falling, reaching around 4.5% in December, down from 8.25% last quarter.

In a January report, Hudson Bankers reiterated its view. “Looking ahead, the region appears poised for sustained M&A momentum, driven by ongoing economic developments and a more optimistic business environment and investor confidence levels. As the region continues to adapt to changing economic dynamics, M&A activities are likely to play a pivotal role in shaping the business landscape in Chile, Peru and Colombia.”

Source: Business News Americas / BN Americas - Chile