Latin America experiences a significant boost in M&A deals

Mergers and Acquisitions (M&A) transactions, after a difficult 2020 due to the decline in activity as a result of the Covid-19 pandemic, registered a strong recovery in Latin America in 2021 with an increase of 41% over the previous period, with a value of USD 166.780 billion*. To analyze the current situation of this sector, we talked to Darío Díaz, partner of Englobally Argentina, with more than 20 years of experience in the consulting area, and a specialist in mergers and acquisitions.

Darío Díaz Englobally
Darío Díaz, partner of Englobally Argentina, and a specialist in mergers and acquisitions

¿What is the current situation for M&A transactions in the Americas?

During 2020, with the pandemic, transactions came to a standstill. Then, since the end of that year, deals that had been delayed began to close and in 2021 there were new transactions that reached record highs, both in amount and quantity, worldwide and with similar trends in Latin America.

The star sector in M&A has been the one known as Technology, Media and Telecommunications (TMT).

¿What effects did the pandemic have on this type of operations and what changes are foreseen in the context of the Russia-Ukraine war from the investor’s point of view?

The most visible effect of the pandemic has been in the change in the forms of consumption and work, which has generated an exponential growth in companies and transactions in the technology sector, both in communications, information security, e-commerce, etc.

On the other hand, one of the effects of Covid-19 is that it has generated a process of change worldwide in the labor field, where many workers have reconsidered their life and work options. Something that had begun with fear of mass unemployment has now led to labor shortages in developed economies. In this war for talent, many companies are turning to mergers and acquisitions to address this need.

The Russia-Ukraine war may generate new scenarios in the commodities and energy sector in Latin America. In addition, the effect that this conflict will have on Europe, if it is extended over time, which could complicate cross-border transactions, will also have to be considered.

¿What are the most attractive sectors and opportunities in the region for investors that are looking to expand through mergers or company acquisitions?

We believe that there are opportunities in many sectors, but Latin America has had a very large growth in the technology sector. Some 40 unicorn companies (companies with a value greater than USD 1 billion) have been created in the region in the last 3 or 4 years.

On the other hand, when we talk about the technology sector, it crosses an endless number of industries or activities: companies linked to agriculture, e-commerce, data analysis, financial services, security, cryptoassets, blockchain and many more.

¿What difficulties might a company that wants to expand simultaneously in Latin America face in several countries? What would facilitate the operation?

Doing business in Latin America is not easy. Each country is quite different in terms of regulations, tax and labor requirements.

You must have an ally that knows each country in depth. Additionally, having a single interlocutor that consolidates the information from each country, with similar procedures and formats, is a great competitive advantage, since it reduces transaction times, analysis, risk weighting, etc.

In a globalized world concerned about climate change and sustainability, ¿how do these new criteria manifest themselves in investors?

What was a trend some time ago has now become commonplace in investor’s business evaluation. Within the decision drivers or requirements that a target company must have, sustainability and environmental care have a higher weighting.

¿What options do entrepreneurs who have set up startups have to get funding to grow their project?

Fortunately there are more and more options for startups, there is currently funding for all stages. Currently in the entrepreneurial world there are angel investors, accelerators and venture capital funds that invest in the “seed” stage, as well as in more developed companies.

¿What is Englobally Latin America’s value proposition for companies that want to explore new markets through an M&A transaction?

At Englobally Latin America we have a team of qualified professionals that will assist you in the M&A process, with special attention to Financial Due Diligence.

Considering the specific characteristics of the transaction to be carried out, you will get an exhaustive financial, tax and labor report of the target company, which includes descriptions, recommendations and risk rating by items.

All this information will be of vital importance both in the acquisition process, for price negotiations, establishment of guarantees and specific clauses of the contracts, as well as for the future integration process of the company’s operations.

We provide a precise internalization of the business and the market to which the company belongs, as well as the history and evolution of the company up to the moment it is put up for sale.

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