Monthly report: Latin America- October, 2017

Number of announced and closed transactions in Latin America fell by 13% in October

  • LatAm Deal volume fell 13% in October 2017
  • Aggregate deal value fell 72% to USD 6.3bn
  • Deal of the Month: Intercorp acquires Seguros Sura and Hipotecaria Sura from Sura Asset                           Management and Grupo Wiese for USD 276.4m

LATIN AMERICA: MARKET INSIGHTS

  • The total number of announced and closed transactions in Latin America fell by 13% in October over the same month last year
  • Aggregate transaction value fell 72% relative to the close of October 2016 to USD 6.3bn, considering 68 deals of disclosed consideration region wide.
  • Total transaction volume YTD is up 2.5%, meanwhile, though aggregate deal value has slipped nearly 26% to 72.7bn in the first 10 months of the year, taking into account 719 announced and closed transactions of disclosed consideration regionally.
TOP SIX MARKETS IN LATIN AMERICA
  1.  Brazil leads deal flow regionally with 855 transactions together worth USD 44.6bn to the close of October, up 4% by volume, down 6% by aggregate value compared to the first 10 months of 2016. There were 378 announced and closed transactions with a disclosed consideration in Brazil contributing to aggregate value in the first 10 months of the year.
  2.  Mexico follows with 237 deals worth a combined USD 14.8bn, down 2% by volume and 18% by aggregate value relative to the same 10-month period in 2016, taking into account 109 deals of disclosed consideration.
  3.  Chile ranks third regionally, its 193 deals YTD together worth USD 6.6bn to the close of October, up 15% by volume and down 47% by aggregate value over the first nine months of 2016, taking into account 83 transactions of disclosed consideration.
  4.  Argentina ranks fourth in Latin America at the close of October with 177 announced and closed deals worth a combined USD 4.6bn, up 8% by volume and down 41% by aggregate value, considering 77 transactions for which a deal value was disclosed.
  5.  Colombia follows with 132 deals in the first 10 months of the year, up 5% over the same period last year. Aggregate deal value fell 83% to just under USD 3bn, taking into account 49 transactions of disclosed consideration.
  6.  Peru rounds out the top six M&A markets in the region, though it continues to slip in both transaction volume and aggregate deal value, 12% relative to the first 10 months of 2016 to 105 deals and 27% to USD 3.6bn respectively, taking into account 49 transactions of disclosed consideration.


CROSS-BORDER DEALS

Bidders based in Latin America made three extra-regional cross-border acquisitions in October, two with targets in North America, and one in the EU.

North American buyers led inbound acquisitions in the region during the month of October, with 18 deals originating from the US and Canada. European acquirers made 13 inbound deals in the region. Asian buyers made three acquisitions in Latin America and one Australian firm invested in the region in October.

DEAL OF THE MONTH

TTR selected the closing of Intercorp Financial Services’ USD 276.4m acquisition of Peruvian insurance and mortgage companies Seguros Sura and Hipotecaria Sura from Colombia’s SURA Asset Management and Grupo Wiese as October’s Deal of the Month.

The closing marks the exit of the Colombian financial services group from these segments in Peru. The buyer was advised by Miranda & Amado Abogados, the target used Intralinks. SURA Asset Management and Grupo Wiese were advised by Rebaza, Alcázar & De Las Casas Abogados Financieros.

 

 

 

Monthly Report: Latin America- August, 2017

LATIN AMERICA

  • Deal volume grew 8% in August
  • Aggregate deal value fell by 9%
  • Deal of the Month: Goldman Sachs’ West Street Infrastructure Partners acquires 50% stake in Compás – Compañia de Puertos Asociados from Grupo Argos.

TTR Insight

Deal volume in Chile’s food industry is up by 62.5% in the first eight months of 2017 over the same period last year, according to TTR data (TTRecord.com).


An overlook at the market

The total number of announced and closed transactions across Latin America grew by 8% in August over the same month in 2016 to 164 deals region wide, according to TTR data.

Aggregate transaction value fell 9% relative to August 2016, meanwhile, to USD 8.3bn, taking into account 67 deals of disclosed consideration.

Total transaction volume is up by about 2% YTD, while aggregate deal value is down nearly 19% to USD 55.8bn, considering 507 announced and closed transactions of disclosed consideration regionally to the close of August.

Top Six M&A Markets in Latin America

  1. Brazil leads deal flow regionally with 636 transactions together worth USD 33.4bn to the close of August, up 2% by volume and down 11% by aggregate value compared to the first eight months of 2016. There were 250 announced and closed transactions with a disclosed consideration in Brazil contributing to aggregate value to the end of August.

2. Mexico follows with 189 deals worth a combined USD 11.8bn, down 2% by volume and 11% by aggregate value relative to the same eight-month period in 2016, taking into account 77 deals of disclosed consideration.

3. Chile ranks third regionally by volume, its 149 deals YTD together worth USD 5bn, up 10% by volume, down 52% by aggregate value, compared to the first eight months of 2016, taking into account 59 transactions of disclosed consideration.

4. Argentina ranked fourth in Latin America at the close of August, its 151 announced and closed deals worth a combined USD 4.3bn, up 13% by volume and down 27% by aggregate value relative to the first eight months of 2016.

5. Colombia follows with 102 deals in the first eight months of the year, down 2% compared to the same eight-month period last year. Aggregate deal value is down 60% YTD to USD 2.8bn, taking into account 36 transactions of disclosed consideration.

6. Peru rounds out the top six M&A markets in the region with 78 deals YTD. Transaction volume fell 23% over the same period in 2016 and aggregate deal value slipped 7% to USD 3.2bn, taking into account 36 transactions of disclosed consideration.

Cross-Border Deals

Bidders based in Latin America made eight extra regional cross-border acquisitions in July, five with targets based in North America, two in the EU and one in Asia.

North America-based buyers led inbound acquisitions in Latin America in July, with 17 deals originating from either the US or Canada. EU acquirers made nine deals in Latin America, while four deals in the region were led by Asia-based buyers. One Australian firm acquired a target in the region in August.

Rankings

Visit our website and take a look at the rankings of legal and financial advisors in our monthly report.


Deal of the Month

TTR selected the USD 136m acquisition of a 50% stake in Compas – Compañia de Puertos Asociados by Goldman Sachs’ West Street Infrastructure Partners III fund from Grupo Argos as Deal of the Month. The target operates port terminals in Cartagena, Manzanillo, Barranquilla, Buenaventura, Aguadulce, Buenavista, Tolú and Houston. The buyer was advised by Gibson, Dunn & Crutcher. The target was advised by Dentons Cardenas & Cardenas and Greenberg Traurig. Grupo Argos was advised by Brigard & Urrutia Abogados, Philippi, Prietocarrizosa Ferrero DU & Uría and Sullivan & Cromwell.

 

Interview with Arturo Costabal

Arturo Costabal, partner at Aninat Schwencke & Cia. gives us his perspective on the Chilean transactional market.

“We consider real estate to be among the most important drivers of economic activity in Chile…We saw the renewable energy boom coming from some time ago, but the activity has now shifted from the development to the construction phase ahead of commissioning the projects”

Read the complete interview here.

 

Interview: Iván Delgado – Pérez-Llorca

Iván Delgado

Corporate Partner and Head at

Pérez-Llorca New York office

TTR interviews Iván Delgado, from Pérez-Llorca New York. The partner compares last year’s M&A market in Latin America with 1st half of 2017.

(ENGLISH)

Mr. Delgado, we already had the pleasure of interviewing you last year. Compared with the M&A market in Latin America in 2016, how would you describe the progress of the market so far this year? Have you seen any significant changes in trends? If so, to what do you think it is due?

I would describe the progress as positive. In the second quarter of the year we have seen a slight increase in transactions compared to the same period of the previous year (493 vs. 509 transactions, respectively). While I believe that there has not been a significant change in this trend, there has however been an increase in the number of transactions that are closing, which could be interpreted as a sign of foreign investor confidence in Latin America, despite the political instability we have seen in recent years in certain countries in the region.

With regard to the private equity market, a segment in which you are an expert, according to TTR aggregate YTD data, investment by private equity firms in Latin America appears to have decreased in comparison with the previous year. However, in this last quarter, there have been more transactions occurring than during the same period in 2016. How would you take stock of private equity activity?

I think the trend in 2017 with respect to private equity is positive. While the first quarter, as shown in the statistics, had less activity than last year, it seems that the sector is finally back on track in terms of growth. Forecasts for the second half of the year are also positive.

With regard to private equity firms investing in Latin American companies, those which most stand out are firms whose headquarters are located in the United States, the United Kingdom and Canada. As head of Pérez-Llorca’s New York office, what qualities or characteristics of Latin American companies do you believe attract the interest of foreign investors?

In Pérez-Llorca’s experience, when investing in Latin American companies, private equity firms mainly value: (I) the company’s good reputation in the field of corruption and prevention of money laundering; (ii) the consolidated position of the company in the local or regional market; and (iii) the desire for international growth with a view to expanding and integrating into other markets.

With regard to the activity of venture capital firms in LatAm, a growing trend has been identified over the course of 2017. Do you think that there is a greater interest on the part of investors in newly incorporated companies and in the entrepreneurial world, in line with global trends?

Yes. In recent years we have seen how interest in newly created companies has grown exponentially worldwide. Latin America is no exception and although it has not been at the same pace as other markets such as the European or American markets, venture capital fund investment has grown considerably in the region.

Generally speaking, so far this year, we have seen a modest upward trend in activity in the M&A market in Latin America, from country to country.  What does the future hold for the end of the financial year? In your opinion, which Latin American countries do you consider are showing a greater potential for growth in investments?

The forecast for the second half of the year is positive. We hope that the number of transactions continues to increase. In my opinion, the Latin American countries with the greatest potential for growth in the short term are: Peru, Argentina and Chile, as shown in recent years (mainly in M&A, private equity and venture capital transactions, without forgetting the large markets of Mexico and Brazil.

 

(ESPAÑOL)

 

Sr. Delgado, ya tuvimos el placer de entrevistarlo el año pasado, en comparación con el escenario de M&A en Latinoamérica en 2016, ¿cómo describiría la marcha del mercado en lo que llevamos de año? ¿Se ha podido apreciar algún cambio de tendencia significativa según su opinión? De ser así, ¿a qué cree que es debido?

Positiva. En el segundo trimestre del año hemos visto un ligero aumento de las operaciones respecto al mismo período del año pasado (493 vs. 509 transacciones, respectivamente). Si bien creo que no ha habido un cambio significativo en la tendencia, sí podría destacarse el incremento de las operaciones cerradas, lo que puede interpretarse como una muestra de confianza del inversor extranjero en Latinoamérica, a pesar de la inestabilidad política en determinados países de la región que hemos visto en los últimos años.

En cuanto al mercado de private equity, segmento en el que usted es especialista, según lo registrado en TTR, de manera agregada YTD se ha observado que en Latinoamérica han disminuido las inversiones de firmas de capital riesgo en comparación con el año anterior. Sin embargo, en este último trimestre sí que se han superado las operaciones ocurridas durante ese mismo periodo en 2016. ¿Qué balance haría de la actividad private equity?

Creo que la tendencia en 2017 respecto a private equity es positiva, y YTD el balance también. Si bien el primer trimestre, tal y como reflejan las estadísticas, la actividad fue menor que la del año pasado, parece que finalmente el sector ha retomado la senda del crecimiento. Las previsiones para el segundo semestre son igualmente positivas.

En cuanto a las firmas de private equity inversoras en empresas latinoamericanas, destacan aquellas cuya sede se encuentra en Estados Unidos, Reino Unido y Canadá. Como responsable de la oficina de Pérez-Llorca en Nueva York ¿Qué cualidades o características de las sociedades latinas cree que despiertan el interés de los inversores extranjeros?

En la experiencia de Pérez-Llorca, a la hora de invertir en empresas latinoamericanas las firmas de private equity valoran principalmente: (i) la buena reputación de la compañía en materia de corrupción y prevención de blanqueo de capitales; (ii) la posición consolidada de la compañía en el mercado local o regional; y (iii) la vocación por la proyección y crecimiento internacional de cara a una futura expansión e integración en otros mercados.

Respecto a la actividad de las firmas de venture capital en LatAm, se ha observado una tendencia creciente a lo largo de 2017, ¿cree que existe un mayor interés por parte de inversores en las sociedades de nueva creación y en el universo emprendedor, siguiendo la tendencia global?

Sí. En los últimos años hemos visto como el interés por las sociedades de nueva creación ha crecido de manera exponencial a nivel global. Latinoamérica no ha sido la excepción y, si bien no al mismo ritmo que otros mercados como el europeo o el estadounidense, ha experimentado también un crecimiento considerable la inversión de fondos de venture capital.

En general en lo que llevamos de año, de un modo más o menos modesto según el país, se han reflejado unos datos positivos que manifiestan un incremento de la actividad en el mercado de M&A latinoamericano, ¿qué futuro próximo augura para el cierre del ejercicio? Según su criterio ¿cuál o cuáles son los países latinos que considera están mostrando un mayor potencial de crecimiento en inversiones?

La previsión para el segundo semestre del año es positiva, esperamos que el número de operaciones siga aumentando. En mi opinión, los países de Latinoamérica con mayor potencial de crecimiento a corto plazo son: Perú, Argentina y Chile, tal y como vienen demostrando en los últimos años (principalmente en operaciones de M&A, private equity y venture capital), sin olvidar de los grandes mercados que siempre han sido y son Méjico y Brasil.

 

LATAM: AGGREGATE DEAL VALUE GROWS 85% IN 1H17

  • Deal volume in LATAM increased 3% in 2Q17 over 2Q16
  • Aggregate deal value is up 86%
  • Deal of the Month: Grupo México Transporte acquires Florida East Coast Railway for USD 2bn
TTR Insight

Deal volume in Colombia’s Oil &Gas sector increased 100% in 1H17 over the same six-month period in 2016, according to Transactional Track Record data. There were eight announced and closed transactions in the sector in the first six months of 2017 compared to four in 1H16.

 

 

Deal volume regionwide rose 3% in 1Q17 over 1Q16, with 509 announced and closed transactions in Latin America to the close of June. M&A activity is up 5% YTD, meanwhile, with 1,026 announced and closed deals in the region in 1H17.

Aggregate transaction value increased by 86% in 2Q17 over 2Q16 to USD 33bn regionwide, taking into account 218 deals of disclosed consideration. YTD, aggregate deal value is up 85% to USD 73.4bn, including 417 announced and closed transactions of disclosed consideration regionally in 1H17.

Top Six M&A Markets in LATAM

Brazil led deal flow regionally with 512 transactions together worth USD 44.5bn in 1H17, up 8% by volume and 220% by aggregate value compared to 1H16. There were 209 announced and closed deals of disclosed consideration in Brazil to the close of June contributing to 1H17 aggregate value.

Mexico follows with 148 deals worth a combined USD 10.7bn, up 1% by volume, down 13% by aggregate value, taking into account 57 deals of disclosed consideration, relative to the same half-year period in 2016.

Chile ranks third regionally with 120 deals together worth USD 5.1bn to the close of 1H17, up 13% by volume and down 49% by aggregate value over the first six months of 2016, taking into account 54 transactions of disclosed consideration.

Argentina continues to garner growing deal flow, with 117 announced and closed deals in 1H17 worth a combined USD 3.6bn, up 13% by volume and 3% by aggregate value, considering 41 transactions for which a consideration was disclosed.

Colombia registered 78 deals in 1H17, the same volume as in 1H16, while aggregate value grew 155% to USD 13.1bn, taking into account 30 transactions of disclosed consideration.

Peru rounds out the top six M&A markets in the region, notwithstanding a sizeable dip in both transaction volume and aggregate deal value. Transaction volume fell 27% to 58 deals while aggregate deal value declined 26% to USD 1.7bn, taking into account 32 transactions of disclosed consideration.

Cross-Border Deals

LATAM firms made 15 extra regional cross-border acquisitions in 2Q17, eight with targets based in North America, four in the EU, one in Asia and one in Australia. EU-based buyers led inbound acquisitions in Latin America in 2Q17, with 67 deals originating from the old world, US and Canada following with 59 transactions. Asian buyers led 19 transactions in Latin America, Australian firms seven and a sole Africa-based acquirer invested in the region.

Deal of the Quarter

TTR selected Grupo México Transporte’s USD 2bn acquisition of Florida East Coast Railway from Fortress Investment Group (NYSE:FIG) as Deal of the Quarter in LATAM. The buyer was advised by Galicia Abogados, Dechert and BBVA Bancomer, while the target was advised by Cravath, Swaine & Moore, Sidley Austin, Barclays Bank and Morgan Stanley.

Interview with Posadas, Posadas & Vecino

Tomás Gurméndez, partner at Posadas, Posadas & Vecino, discusses the M&A market in Uruguay and across Latin America
(Interview in English and Spanish)

TTR in the Press

BN AMERICAS – “Regional M&A activity shows heavy surge in valuation in H1

AMÉRICA ECONOMÍA – “Fusiones y adquisiciones de América Latina aumentan 86,38% en el 2Q17

EL FINANCIERO – “Las mexicanas duplican el valor de compras en EU

 

Complete Report

INTERVIEW: TOMÁS GURMÉNDEZ – POSADAS, POSADAS & VECINO

Partner at 
Posadas, Posadas & Vecino

 

(ENGLISH)

Tomás Gurméndez, as an M&A expert, how do you assess the M&A market in Latin America year-to-date, particularly in Uruguay?

M&A activity in Latin America has been growing for the past several years and 2017 has been no different. The data show that M&A activity has grown moderately in 2017 compared to the same months in 2016. This demonstrates that, despite political uncertainty in certain countries of the region, LatAm remains a very attractive region for international investors. In the case of Uruguay, the year started off slow in 1Q17, but starting in April, M&A activity has surged. We’re seeing many deals in agroindustry and forestry, which is logical given Uruguay is a producer of agricultural commodities. We’re also seeing significant transactions in retail and renewable energy.

Energy law is among your practice areas. Overall, energy transactions tend to be robust in Latin America. Do you believe the legal framework in the region facilitates M&A in this sector? Is development of the energy sector a good bet to ensure overall economic growth?

More than the laws, I believe the public policy that has been crafted over the past several years in many countries of Latin America has driven development of the energy sector, primarily for renewables rather than conventional. The great number of renewable projects developed in Latin America over the past several years has mobilized an extraordinary amount of capital, above all for investment funds from the US and other regions, which have demonstrated a lot of appetite for operational renewable assets. The energy industry is among the most sensitive and strategic for any country, given the implications for sovereignty and independence, and without a doubt, Latin American nations will continue betting on the energy sector as one of the most important pillars of economic growth in the region.

Year-to-date, TTR data show there’s been a significant increase in the number of medium-size deals in Uruguay compared to smaller transactions. Do you believe this trend relates to an evolution of the market or simply circumstantial factors?

Given the size of Uruguay, I don’t believe it’s possible to talk about an evolving market consolidation. While transactions this year may appear more sizeable considered individually, the reality is that the total number of deals in 2017 is not significantly higher than in the comparable period of 2016. Rather, the growth in deal volume has been moderate.

Another area of expertise for you and your firm is banking and finance. Do you believe financial institutions in Latin America favor investors to the degree that they support greater M&A activity, and particularly in Uruguay? If not, what are the changes that should be implemented?

The local banking sector in Latin America hasn’t played a significant role as a financier of M&A deals, in many cases owing to market-related factors and other regulatory restrictions. On the other hand, it is very common to see international banks very active in the Latin American M&A market. In the case of Uruguay, local banks have scarcely played a role in important M&A transactions.

Year-to-date, cross-border deals have picked up significantly in Uruguay, with a 38% increase in transactions between local and international companies in 1H17 over the same six months last year. Do you see this as reflecting a process of greater opening in Uruguay? Do you see this reflected across the region as a whole?

Given that Uruguay is a mature democracy with a strong rule of law and equal treatment for foreign investors, the country has long been attractive to the international investor. Uruguay’s opening to the world did not happen recently, and certainly not in 2017. The increase in cross-border deals in 2017 can be explained by the reactivation of the economy in the country relative to 2016, which was a slow year for economic growth.

 


(ESPAÑOL)

Como experto en M&A ¿cómo evalúa la marcha del mercado Latinoamericano desde el inicio del año hasta ahora? ¿Podría darnos una breve descripción? ¿Y en Uruguay en particular?

La actividad de M&A en Latinoamérica viene en aumento desde hace varios años y 2017 no ha sido la excepción. Todos los números indican que en 2017 la actividad de M&A en lo que va del 2017 ha aumentado moderadamente en comparación con el mismo período de 2016.  Esto demuestra que, a pesar de cierta inestabilidad política que están sufriendo algunos países de la región, LatAm sigue siendo una región muy atractiva para los inversores internacionales.

En el caso de Uruguay, 2017 comenzó algo lento en el primer trimestre, pero a partir de abril la actividad se ha incrementado notoriamente. Estamos viendo mucha cantidad de operaciones de M&A en el sector agro industrial y forestal, lo que resulta lógico al ser Uruguay un país productor de commodities agrícolas. También estamos viendo muchas operaciones en la industria retail y en la energía renovable.

Entre sus áreas de actuación se encuentra Energy Law, en general en Latinoamérica existe un gran número de operaciones que tienen lugar en el sector energético ¿Cree que las leyes en Latinoamérica facilitan estas transacciones? ¿Considera que el segmento de la energía supone una buena apuesta para garantizar el crecimiento de la economía?

Más que las leyes, creo que las políticas públicas que se han implementado en los últimos años en varios países latinoamericanos ha fomentado fuertemente el desarrollo del sector energético, principalmente el de las energías renovables no convencionales.

La gran cantidad de proyectos renovables desarrollados en LatAm en los últimos años ha movilizado una corriente inversora extraordinaria, sobre todo por parte de fondos de inversión americanos y de otras regiones , con mucho apetito por proyectos renovables ya en operación. Eso explica, al menos en parte, la gran cantidad de operaciones de M&A en el sector energético.

La industria de la energía es una de las industrias más sensibles y más estratégicas para cualquier país, incluso por razones de soberanía e independencia, por lo que sin dudas que los países latinos seguirán apostado al sector energético como uno de los pilares imprescindibles para el desarrollo de las economías regionales.

Year to Date, según lo registrado en TTR, en Uruguay ha habido un interesante incremento de las operaciones medianas frente a las pequeñas, ¿cree que el aumento del capital movilizado se debe a una evolución del mercado o se trata simplemente de factores circunstanciales?

Por el tamaño del Uruguay, no creo que sea posible hablar de una evolución consolidada de nuestro mercado. Si bien las transacciones ocurridas en 2017 aparecen como más relevantes individualmente consideradas, la realidad es que monto total de las operaciones 2017 no resulta sustancialmente mayor al verificado para el mismo período de 2016, sino que se aprecia un aumento moderado.

Otra de las áreas en las que usted está especializado es en Banking and Finance, según su experiencia y conocimientos, ¿considera que las entidades financieras latinoamericanas favorecen a los inversores para que haya una mayor actividad en el mercado de M&A? ¿Y en concreto en Uruguay? De no ser así, ¿cuáles cree que son los cambios que deberían realizarse?

La banca local latinoamericana no ha tenido un papel relevante como financiadora de operaciones de M&A, en muchos casos por razones de mercado y en otros por restricciones regulatorias. En cambio, si es común ver muy activa a la banca internacional en el mercado de M&A latino.

En línea con lo anterior, en Uruguay la banca uruguaya tiene escasa participación en las operaciones M&A más relevantes. 

En lo que llevamos de año, en Uruguay se ha manifestado un importante incremento de las operaciones cross-border frente a las que tuvieron lugar durante este mismo periodo el pasado ejercicio. En 2017 un 38% más del total de operaciones sucedidas se han realizado entre empresas uruguayas y extranjeras. ¿Cree que el mercado uruguayo podría estar experimentando un proceso de apertura a la inversión extranjera? ¿Y el resto de Latinoamérica?

Caracterizado por ser una democracia consolidada, con alta seguridad jurídica y trato igualitario para los inversores extranjeros, Uruguay siempre ha sido un mercado atractivo para el inversor internacional. La apertura de Uruguay al mundo no es algo reciente o que haya comenzado en 2017. El incremento de operaciones cross-border en 2017 puede explicarse en la reactivación económica del país en comparación con 2016, que fue un año de escaso crecimiento económico.