Translate:
  • M&A activity to reach US$108 billion next year in the region
  • Domestic and cross-border deals to peak in the region in 2018
  • IPO activity to recover later, in 2019
  • Uncertainty persists over potential protectionist measures in key economies

M&A activity in Latin America will increase by 24% this year despite uncertainty and geopolitical factors, and will jump 15% in 2018, reveals the third edition of the Global Transactions Forecast issued by the leading global law firm Baker McKenzie.

According to the forecast, developed in association with Oxford Economics, the region has seen an upturn in M&A activity throughout the year, with total deal values rising to US$94 billion in 2017, up from US$76 billion in 2016. In 2018, M&A activity in the region will reach US$108 billion, a 15% increase compared to 2017. Some megadeals -particularly in Brazil- have substantially boosted M&A activity in Latin America this year, while the rally in prices for copper and iron ore and economic recovery in Brazil should help deal values accelerate into 2018 and beyond. The forecast anticipates total M&A activity to peak at US$134 billion in 2019 in Latin America.

The report highlights that Latin America has benefited from two positive deal drivers in 2017: the easing of fears that U.S. President Donald Trump will impose 35% tariffs on Mexican exporters (although targeted sector restrictions still seem likely), and a rapid cooling of inflation in Brazil. These developments have improved business and investor confidence in the region’s two largest economies.

The M&A Outlook

M&A ACTIVITY LATIN AMERICA

 

Argentina

Brazil

Chile

Colombia

Mexico

Peru

Rest of the Region

TOTAL

M&A 2016 (US$B)

6

21.7

19.8

4.3

10.9

3.5

9.3

75.5

M&A 2017

(US$B)

4.1

53.8

5.8

1.4

9.5

4

15.5

94.1

M&A 2018

(US$B)

3.1

46.4

7.5

4.2

27.2

3.3

16.1

107.8

 Source: Baker McKenzie's Global Transactions Forecast - November 2017

The Global Transactions Forecast predicts that the combined M&A activity in Argentina, Brazil, Chile, Colombia, Mexico, and Peru -which together account for over 80% of the M&A activity in the region- will reach US$79 billion in 2017, and US$92 billion in 2018. The total number of deals in these markets is expected to grow by 54% next year (from 816 to 1,260), indicating a greater volume of deals with lower average values. Brazil, Mexico, and Peru will register the highest growth in deal volume among these countries.

Industries such as Energy, Mining and Infrastructure (EMI) brought dynamism to the M&A activity in Latin America this year.

"We are seeing good deal-making progress in Brazil, despite volatile market conditions in the region and globally," said Liliana Espinosa, Latin America regional head of the M&A practice group at Baker McKenzie. "We may still see some caution at the beginning of next year in specific markets with regards to M&A activity, but on an overall regional level we are expecting growth, with private equity in particular playing a driving role.

As for deal type, Baker McKenzie expects that cross-border transactions will again make up the bulk of transactional activity in Latin America, having accounted for 62% of all deals in the region in 2017.

Leading the region

Brazil continues to dominate M&A activity in the region, reaching US$54 billion in total deal value this year, although this number is forecast to decline slightly for next year. Mexico finished in second place for 2017, with US$10 billion in total recorded deal value.

As for the other key markets in the region for M&A, Colombia (200%), Mexico (186%) and Chile (29%) will see significant increases in M&A activity next year over 2017. The anticipated growth in M&A in Mexico will be driven by an economic rebound and an acceleration of GDP growth that are expected to materialize as long as any protectionist measures implemented by the US are modest and targeted. Meanwhile, M&A growth in Chile and Colombia will be fuelled by favourable interest rates and inflation levels.

IPO Outlook

In the IPO market, the forecast expects values from Brazil, Mexico and Colombia to climb to a total of US$7.2 billion this year.
IPO markets in Brazil and Mexico rebounded in 2017, with domestic IPO proceeds in both countries rising at least ten-fold in 2017 from the year before. With financial market conditions continuing to improve in both economies, and political risk easing, we expect a further pickup in domestic IPO activity in Latin America in 2018, with a cyclical peak of US$7.5 billion in 2019.

IPO ACTIVITY LATIN AMERICA

 

Argentina

Brazil

Chile

Colombia

Mexico

Peru

TOTAL

2016 IPO

(US$M)

32.4

214.9

0

0

280

0

527.3

2017 IPO

(US$M)

0

3,823

0

7.9

3,372.8

0

7,203.7

2018 IPO

(US$M)

162.7

3,161.3

51.9

121.8

2,823.5

0

6,321.2

Source: Baker McKenzie's Global Transactions Forecast - November 2017

Globally

2017 has been a period of apprehension for global dealmakers and while economic growth has certainly slowed, the cliff-edge some were predicting has failed to materialize. The Global Transactions Forecast predicts that total global M&A activity will reach US$2.6 trillion this year and rise to US$3.3 trillion in 2018.  The forecast also anticipates a cyclical peak in 2018 for several macroeconomic and financial deal drivers, with 2018 marking the high point of the deal cycle for the world's largest transaction centers. The easing of key economic and political risks and the emergence of positive macroeconomic deal drivers will accelerate deal activity in 2018.

At a global level, in addition to positive economic developments, underlying strategic drivers like the search for growth and yield, the use of consolidation to achieve synergies, the deployment of unspent capital, and the use of M&A to drive business model changes will aid the increase of M&A activity in 2018.

Explore Our Newsroom