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Market players upbeat about infra, ICT dealmaking opportunities

Bnamericas Published: Thursday, October 13, 2022
Market players upbeat about infra, ICT dealmaking opportunities

Despite a cooldown in dealmaking this year amid more challenging macroeconomic and political contexts, M&A and transaction players remain positive about Latin America, Felipe Junqueira, regional M&A and transaction solutions leader at UK-based risk assessment firm Aon, told BNamericas.

The transactional scenario, although somewhat cautious in 2022, offers opportunities in sectors that are undergoing consolidation, such as utilities, software and even telecom infrastructure, Junqueira said.

Conditions are expected to improve in 2023, following the conclusion of electoral processes and with better clarity about macro policies in key markets such as Brazil, he said.

“We've given a boost to our operations in Latin America. Last year we began to operate in a more structured way in the region, with a local presence, and with dedicated teams and sub-region divisions,” Junqueira said.

In Latin America, the company, which is one of the largest global providers of risk management, has advised on 50-100 transactions annually over the past years, according to Junqueira. This variation is due to market fluctuations and a previously less focused regional operation, he said.

Aon’s Latin America operations are now divided into the sub-regions of Brazil, Southern Cone (mainly Argentina and Chile), the Andean region, and Mexico, Central America & the Caribbean.

Each sub-region has a leader and specific teams dedicated to each transactional specialization, such as acquisitions, private equity deals and venture capital allocations, he said.

Worldwide, Aon's workforce surpasses 50,000 professionals. Of this total, 400 are dedicated to M&A dealmaking. In Latin America, M&A staff comprises 10 people, according to the executive.

“The chief demands for our business, speaking of risk, are coming from the sectors of infrastructure, natural resources, power, including oil and gas, in a first place; followed by industries in general, including health and hospitals; and finally from the technology and financial sectors,” Junqueira said.

Although not home to dealmaking trailblazers, technology and the financial sector are the most active ones in the firm’s portfolio, according to him. 

“When we talk about technology and the financial sector, we are talking about a less palpable and less physical risk. Assets are intangible. This requires expertise to analyze the risks. In utilities, the challenge is in sectors that are more heavily regulated, such as oil and gas and water.”

He added, “two other lines of action we have brought to Latin America, given the demands we have seen in the market, refer to intellectual property and cyber risk.”

The company also deems increasing global market volatility and accelerated emergence and collapse of business models providing opportunities for risk assessment, supporting complex corporate decision-making. 

SLOWDOWN

For now, dealmaking remains in decline.

With a more risk-adverse scenario and approaching elections, Latin America’s largest dealmaking market, Brazil, saw 1,699 transactions year-to-September, for a 10.7% decline over the same period in 2021, according to the latest data by Transactional Track Record (TTR)

The study, carried out in partnership with Aon, includes venture capital, equity investments, asset acquisitions and M&As.

Of the total transactions, 47% involved disclosed values and 77% were already concluded.

Considering those with disclosed values, the total aggregated value between January and September amounted to 234bn reais (US$44.5bn), down 42% year-over-year.

In Q3, TTR and Aon mapped 505 transactions in the country, down from 801 in 3Q21, the fourth quarter in a row of sequential declines.

The internet, software & IT services sector continues to be the most active, with 347 transactions in Q3, but down 26% year-over-year. Next comes the industry-specific software sector, with 247 transactions.

TTR’s highlight deal in the quarter was the conclusion of the US$1.02bn acquisition of cement group LafargeHolcim Brasil by rival CSN Cimentos.

Law firms Pinheiro Guimarães; Barbosa Müssnich Aragão; and Mattos Filho, Veiga Filho, Marrey Jr. and Quiroga Advogados provided legal advice.

Financial advice was provided by Itaú BBA and BNP Paribas.

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