Overall dealmaking activity continues in the doldrums in Chile despite the resilience of the internet and technology sub-sectors, January-October data show.

Economic and logistical fallout from the pandemic has partly snarled the wheels and cogs of M&A this year, although distressed dealmaking – and a gradual economic recovery underway – should support a rebound over the coming quarters.

Data from research firm Transactional Track Record (TTR) show that total aggregate value and number of transactions fell 76.7% to US$2.94bn and 23.0% to 171, respectively, in January-October on a year-on-year basis.

Similar readings were reported for January-September, although activity accelerated apace in Q3 on a quarter-on-quarter basis. And last week’s news that Chinese giant State Grid International Development had agreed to buy Spanish group Naturgy’s Chilean electric power unit CGE for around US$3.0bn will help boost the full-year total. Chinese investors are taking a more strategic approach to investment in Latin America, with electricity and technology assets blinking brightly on their radars.  

Meanwhile, in Chile in January-October, of the four sub-sectors with most deals, only technology and internet saw growth in volume, of 73% and 156%, respectively. The number one sub-sector by volume, financial and insurance, contracted 35%, while real estate dropped 49%.

Amid Latin America’s coronavirus-fueled rapid digital transformation and with ample capital in the market, the main targets of VC funds over the period were the internet (with number of deals up 125% to 18) and technology (up 70% to 17) sub-sectors. VC investments in financial and insurance and biotechnology firms were also up, by 50% and 100%, respectively.  

Region-wide, a similar trend was observed in January-October, with venture capital bucking a negative overall decline. Indeed, the number of VC operations grew 21% as the number of overall deals fell 15.3%, TTR said.  

VC deal volume and aggregate value saw double and triple-digit annual growth in Chile in 2016-19. In January-October, in the Chilean VC investment space, total aggregate value was down 79.2% to US$149mn as volume grew 60.0% to 48.

In the acquisition sphere in Chile, real estate remained the number one asset class by volume, a position it has held since at least 2016. Nevertheless, volume dropped 53% to 8 deals, according to TTR data. 

THE WIDER REGION

Fellow research company Mergermarket said, following a gloomy Q2, that Latin America reported an uptick in deals in Q3.

Mergermarket, which measures activity differently than TTR, said there were 117 deals worth US$16.7bn in Q3, compared with 80 and US$1.3bn, respectively, in Q2.

The third quarter saw major deals advance, including bids made for Brazilian telco Oi’s mobile business. An auction is due for December 14. América Móvil’s Claro Brasil, Telecom Italia's TIM and Telefónica's Vivo, which made a joint offer of 16.5bn reais (US$3.01bn), are expected to land the business. 

For January-September, Mergermarket reported 343 deals for US$25.6bn, compared with 522 for US$63.4bn a year earlier.

Source: Business News Americas / BN Americas - Chile