M&A activity in Latin America decelerated in the first half of 2019. This downward trend is led largely by trade uncertainty and would have been far sharper if it weren’t for a boom of technology and internet firms’ activity.

According to Transactional Track Record (TTR), 986 M&A operations took place in 1H19, 400 of which disclosed deal value of nearly US$49bn. This represents a 10.6% decline in disclosed value and a 7.3% drop in the number of operations, compared to the first half of 2018.

In their analysis, Mergermarket (MM) and Acuris company measured M&A activity differently, excluding, for example, ongoing deals like Spanish financial giant Santander’s buyout of the minority stake held in its Mexican subsidiary for US$2.94bn. 

MM counted 255 M&A deals in Latin America valued at US$35.8bn in 1H19, down from 344 (-25.9%) and US$49bn deal value (-26.9%). 

MM’s chief analyst for the Americas, Philip Segal, pointed to growing fear of tariffs as important factor in the slowdown. But, he added, “while the prospect of increased tariffs has caused dealmakers to consider hitting the pause button, opportunities in the region assuaged some of the hesitancy…for now market conditions don’t appear to be severely impeding deal activity.” 

INTERNET & TECH

Both studies counted upticks in technology and internet deals, saving the M&A first half in Mexico. TTR reported 25 internet subsector deals in the period, up 56%, with 21 tech deals, a 91% increase. These include M&A, private equity, venture capital and asset acquisitions.

Conversely, the real estate and financial/insurance subsectors – which consistently led activity in recent years in Mexico – fell during the period, with 15 real estate deals (-42%) and 14 deals in the finance and insurance subsector (-62%).

TTR reported 136 tech deals in the first half for Brazil, up 11%, making the subsector the most active in Latin America’s largest economy. Meanwhile, in Colombia, tech deals increased 300% to 12, while internet deals were up 83% with 11 operations, reflecting the fintech boom.

Colombia had 32 deals announced in 1H19, according to Mergermarket, the most ever recorded in the country for first-half activity.

Technology deals also led in Argentina, with 10 deals going down in 1H19, up 11%, whereas the nine internet deals represent a 36% drop.

Chile had the fewest deals since 1H04, with MM recording only 17. And while TTR recorded 105 deals in Chile (applying different criteria) neither the tech nor the internet subsectors ranked among the four strongest.

Mergermarket noted that while the energy, mining and utilities (EMU) sector “continued to buttress deal-making in Latin America” with 36 deals worth a combined US$15.5bn, “technology saw record-level activity.”

The firm reported 36 tech-related transactions in Latin America worth US$2.3bn, nearly doubling the US$1.2bn in disclosed deal value for 15 deals (21 in total deals, including with undisclosed value).

“Activity in the sector was led by deals in the consumer technology space, highlighting a growing consumer base in the region,” Mergermarket wrote.

The firm highlighted the US$1bn investment by Japan’s Softbank in Colombia-based unicorn Rappi, an online delivery app that is already popular in several countries. Rappi has raised over US$400mm since 2016, Mergermarket said, adding “the deal marks the largest technology fundraising in Latin America on record.”

MM noted that Softbank also participated in a “club-style deal” to buy a roughly 30% stake in Brazil-based Gympass, an online platform for gym memberships, for US$300mn. Pther participants include Atomico, General Atlantic, and Valor Capital. 

“Gympass’ fundraising represents an emerging and expanding fitness tech space in the region,” added MM.

 

Source: Business News Americas / BN Americas - Chile