After two years of stagnation in the number and a drop in the value of M&A operations in Latin America, activity picked up moderately at the end of 2016, a trend that has strengthened this year. In the first four months, there were 668 transactions in the region, up 4.7% over the same period in 2016, according to Transactional Track Record (TTR). Operations with disclosed values totaled US$14.6 billion, a year-on-year jump of 124.3%.

The drivers behind the increase are varied, but there are two that stand out. Weaker Latin American currencies against the US dollar after Donald Trump's victory in the US elections reduced asset values, making them more attractive to foreign investors towards the end of last year. And in Brazil - the region's largest M&A market - the deepening corruption scandals and the sluggish recovery from the worst recession in decades have been causing a credit crunch, boosting the need to sell assets as a way for companies to raise cash. Another factor is the impact of regulatory changes in several countries, such as the opening of the energy and telecommunications sectors in Mexico.

These factors will continue to have an impact in the coming months. At the same time, the economic outlook for Latin America is improving. After contracting 0.5% in 2015 and 1.1% in 2016, ECLAC projects regional GDP will grow 1.1% this year. As a result, the change in trend seen at the end of last year - 35% of mergers and acquisitions in the region in 2016 were completed in the fourth quarter, according to TTR - is set to pick up pace this year.

In this report, we look at the number and value of mergers and acquisitions in the countries with the most operations in Latin American. In addition, we explain which sectors are seeing the most deals, and what factors could encourage or hold back transactions in the short and medium term.

Figure: Transactions


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