TTR In The Press
Business News Americas / BN Americas
Where dealmaking is getting done
Dealmaking decelerated in Latin America through April as uncertainty envelops the region - although some market segments are blinking on investor radars.
Fallout from the crisis has largely snarled M&A wheels and cogs, as companies embrace caution in an unfavorable environment that is in constant ﬂux and hampering face-to-face talks.
Reported deal value for January-April was down 54.3% to US$17.1bn compared with the same period of 2019, according to research ﬁrm Transactional Track Record. The number of deals stood at 538, down 33.2%.
January-March data from fellow research company Mergermarket paints a similar picture. Over the period reported deal value was US$8.69bn, down 49.7%, while the number of transactions was 113, down 28.5%.
Mergermarket measures dealmaking activity diﬀerently.
Marcela Chacón, TTR research and business intelligence analyst for Latin America, said the appetite for deals would likely remain dampened this year and that much depended on how long the crisis lasts.
The Latin American M&A market has been held back by the uncertainty and also by having to conduct negotiations remotely, Chacón said. Some strategic transactions have, however, advanced in the past two months in the health, food and technology sectors, she added.
The utilities sector is among the more resilient and stable amid the crisis and it has largely retained the interest of investors, with private equity ﬁrms sniﬃng around the region's third biggest dealmaking market, Chile.
Among deals recently closed was the acquisition of Chilean 68MW solar PV plant Salvador by Canada’s Innergex for US$69mn.
Indeed, Mergermarket said Latin America’s energy, mining and utilities sectors saw a combined 23 deals in the ﬁrst quarter, the biggest tally for the quarter and up from 21 in 1Q19.
“M&A activity in Latin America - as in most other geographies - is likely to drop due to the coronavirus downturn. However, bright spots are expected,” said Carlos Martínez, senior LatAm correspondent at Mergermarket.
Martínez cited as examples online grocery/food segment startups in Mexico and Colombia, adding that distressed dealmaking was also expected this year as the regional economy wheezes.
But negotiators will face hurdles.
“Valuations, however, continue to be a sticking point in M&A talks as no one knows what a company will be worth tomorrow,” Martínez said. “As a result, a number of potential buyers have asked for transaction agreements to include a clause that allows them to back out of a deal if lockdown measures are extended beyond a mutually agreed time.”
In the asset acquisition space, the leading subsector was real estate, with 30 deals in January-April, down 36% year-on-year, according to TTR. Oil and gas saw nine transactions, down 47%, while mining saw six, up 100%, and steel and metallurgy registered ﬁve, up 25%.
Private equity investment focused on transport, healthcare and highways, saw deal volume in the ﬁrst four months growing 50%, 200% and 400%, respectively.
Venture capital investment continued to focus on technology, but transaction volume was down 11% in January-April. Meanwhile, internet and agriculture were up, 4% and 150%, respectively, said TTR.
M&A data for May will likely be similar although a gradual lifting of restrictions in the region - for example in Argentina - could eventually feed through into an uptick.
A forecast improvement in economic growth in the third and fourth quarters could also inject a measure of vim into the region's ﬂagging deal appetite.
M&A BY COUNTRY IN JANUARY-APRIL
Latin America’s biggest economy saw 316 transactions over the period, down 29% year-on-year, with disclosed deal value shrinking 59% to US$9.23bn, according to TTR data.
The region’s second-largest economy saw 81 deals, down 22% as disclosed deal value registered at US$2.63bn, down 58%.
The Andean nation posted 54 deals, down 41%, as disclosed deal value came in at US$1.29bn, down 63%
The country reported 38 deals, down 55%, with disclosed deal value coming in at US$1.97bn, down 24%.
Thirty-four deals were reported in Argentina, down 36%, with disclosed deal value down 58% to US$566mn.
The metals-exporting country saw 22 deals, down 64%, as disclosed deal value registered at US$521mn, down 68%
Source: Business News Americas / BN Americas - Chile