Latin America's M&A Landscape Faces Slump: Deal Numbers Drop 17.6% y-o-y in H1 2023

The pace of M&A transactions in Latin America continued to weaken, with a significant decline of 17.6% y-o-y, totaling 863 deals in the first half of 2023. This downward trend gained momentum in Q2, hitting a nadir of 400 transactions, the lowest figure in three years.

Increasing political tensions in various regional countries, coupled with weakened macroeconomic indicators and limited access to capital due to rising interest rates, suggest that a recovery in M&A activity throughout the region is improbable in the latter half of 2023.

The escalating headwinds have unsettled foreign investors, resulting in 25.6% fewer transactions in H1 2023 (186 deals). The collective value of these transactions dipped by 18.4% to USD 10.6bn. Private equity investments also experienced a sharp drop, with volumes plummeting by 25% y-o-y and value contracting by 48%.

This prevailing sluggishness extends across major Latin American nations, with an exception being Mexico, where deal numbers edged up by 1.7% to 120, fueled by the nearshoring boom. The country witnessed its largest M&A deal in H1- the USD 6bn sale of several power plants by the Spanish energy group Iberdrola to the Government. This propelled Mexico's aggregate deal value to more than double, reaching USD 8.4bn, with potential for further growth upon Citigroup's potential sale of its Mexican consumer banking business Citibanamex.

In Brazil, the region's largest M&A market, dealmaking decelerated to its lowest level since 2020. Volumes dropped by 21.3% y-o-y to 500 deals, and the combined value plunged by 59.3% to USD 11.3bn in H1 2023. Despite maintaining leadership in deal count and value, the downturn due to fewer substantial transactions is evident. The country witnessed just two deals worth USD 1.0bn and more in the period. These included the acquisition of mining companies Atlantic Nickel and Mineracao Vale Verde by London-listed SPAC ACG Acquisition Company, as well as the purchase of fintech Pismo by credit card giant Visa.

Examining the sectoral distribution of M&A deals, IT & Internet remained resilient, topping the transaction count at 242 despite diminished startup funding. Energy & Utilities dominated deal value with USD 11.8 bn, driven by Iberdrola's disposal in Mexico and the USD 4bn sale of Enel's local business in Peru. Finance & Insurance secured the second position with USD 3.6bn in deal value, closely followed by the Mining sector at USD 3.5bn. Despite sectoral variations, the overarching narrative of Latin America's decelerating M&A activity persists, raising questions about its potential resurgence in the near future.

EMIS alongside leading global law firm CMS, are pleased to launch the Emerging Europe M&A 2022/23 Report, exploring the trends and data within the region, on both a country and sector basis, in 2022. Download your complimentary copy here.