The volume of M&A deals in Latin America is down 35% this year to $86 billion, according to data from Refinitiv.
Roderick Greenlees, global head of investment banking at Itau Unibanco Holding SA, said the total value of mergers and acquisitions, while lower than the record year of 2021, was within the historical range of previous years.
Bankers expect M&A volumes to increase by up to 20% in the region next year as Latin America becomes more relevant among emerging markets. Many emerging market investors have already pulled out of Russia due to the war in Ukraine, and are now reducing their exposure to China, concerned about the impact of erratic COVID policies, tensions with Washington and opaque Chinese corporate finances.
Latin America has a great opportunity to increase its share among emerging markets, said Nicolas Roca, co-head of Latam M&A at Citigroup.
“Election-related volatility in the region tends to be short-lived and will not affect that trend,” he said, citing the example of the market improving in Chile a year after the country’s election.
Investors are also awaiting economic policy proposals from Brazil’s president-elect Luiz Inacio Lula da Silva, the last elected leftist in the region after Colombia’s Gustavo Petro, Roca said. Lula will take office on January 1 and has announced that Fernando Haddad, loyal to the party, will be his finance minister.
HEALTHCARE, ENERGY
For the second year in a row, healthcare transactions were among the largest in the region.
Hospital chain Rede D’Or Sao Luiz SA’s acquisition of Brazilian insurer Sul America SA for $3.1 billion in an equity deal underlined activity in the sector. Aliansce Sonae’s $2.1 billion acquisition of mall operator BR Malls began with an unsolicited bid, the type of deal unusual in Brazil not too long ago.
Energy should continue to be a very active sector, particularly renewable energy and transmission assets, said Daniel Bassan, CEO of UBS BB.
Fabio Medeiros, head of investment banking in Brazil for Morgan Stanley, also sees potential consolidation among junior oil companies that have grown in recent years, acquiring assets sold by state oil company Petrobras. Lula should end the sale of state assets.
High interest rates and credit defaults appear to be driving retail transactions which have increased slowly in recent months, said UBS BB’s Bassan.
IPOS on the back burner
The return of the initial public offerings in 2023 looks more difficult, according to the sources.
Equity offerings fell 61% in Latin America this year to $13.4 billion, according to Refinitiv data through Dec. 26. Brazilian investors pumped money into fixed income assets as benchmark interest rates hit 13.75%.
While rates are also rising in other developed markets, Latin America is now back on the radar of international investors after they pulled out of other major markets, said UBS Chief Executive Teodora Barone.BB.
The first IPO of the year should be the listing of energy assets held in Brazil by the Chinese company Three Gorges.
The toilet companies could resume their listing intentions if the Lula government maintains the recent laws that regulate the sector and authorize a higher volume of private investment.
M&A Ranking 2022 – Latin America
Financial Advisor Volume (millions of US dollars) Number of transactions
Itau Unibanco 15 372 42
Banco BTG Pactual 13 911 71
Rothschild & Co. 13 882 24
Banco Bradesco SA 13 146 58
Cite 10.605 14
Morgan Stanley 8,857 13
Lazard 7.404 17
JPMorgan 6.184 15
Santander CIB 5 996 35
Scotiabank 5,694 9
Total 88 026 1 354
Source: Refinitive. YTD data through December 26
