Deal-making in Latin America decelerated in the first quarter as Brazil held a commanding lead in terms of volume and aggregate value.

Activity slowed down in Q1 as the coronavirus crisis whipped up uncertainty and created logistical hurdles such as restrictions on face-to-face meetings.

Weakened Latin American currencies have also dented valuations, which could have caused sellers to keep hold of their assets.

Reported deal value over the first three months was down 37.5% year-on-year to around US$13.2bn, according to research firm Transactional Track Record (TTR). The number of deals stood at 396, down 32.1%.

Brazil held a solid market lead. The region’s biggest economy and M&A jurisdiction accounted for 239 deals, down 26% year-on-year but dwarfing the 58 and 38 reported in Mexico and Chile, the region’s No. 2 and No. 3 M&A markets, respectively. 

By volume last quarter, Argentina and Colombia were joint No. 4, reporting 25 each. Peru saw 16 deals. 

The only bright spot was a 4% increase in disclosed deal value in Brazil to almost US$9.94bn. The biggest deal with a disclosed price tag last quarter was Brazilian power firm Eneva’s  proposed 6.6bn-real (US$1.26bn) merger with AES Tietê, a unit of US-based AES Corp, using cash and shares. 

By sector, technology accounted for the bulk of deals (55) in Brazil, followed by real estate (33), financial services (33) and healthcare/cosmetics (24).

Earlier this month, Chilean financial advisers Hudson Bankers said the commodities, natural resources and basic services sectors were helping support M&A activity in Chile, Peru and Colombia. 

In technology, potential investors in Chilean fintech and insurtech startups and those across the wider region see opportunities as fallout from last year’s social unrest and the pandemic, such as a weaker currency, dents valuations.

Regional venture capital fund Magma Partners said some of its investors – but not all – are bullish.

Last year Latin America saw 2,432 deals, up 7.14% compared with 2018 levels, according to TTR. Total disclosed deal value was nearly US$127bn, up 40.2%.

A peak in coronavirus cases is expected this quarter, which should be followed by a recovery in Latin America starting in H2. An economic rebound and reduced uncertainty should underpin an uptick in deal-making activity.

Source: Business News Americas / BN Americas - Chile