The cooling of the economy in 2022 caused mergers and acquisitions in the main Latin American countries to drop, at least when considering the overall amount in US dollars, falling short from the figures seen in 2021.
Between January 2 and December 26, 2022, there were US$ 106.9 billion in mergers and acquisitions in Latin America, of which US$ 44.2 billion in deals were completed, US$ 37.5 billion in pending deals, US$ 18.8 billion in proposals, US$3.4 billion that were withdrawn in deals that failed to consolidate, and another US$2.9 billion in cancelled deals.
The total for this time period represents 35.9% less than in the same period in 2021, when the figure was US$168.3 billion, according to data compiled by Bloomberg and whose values are public.
In 2021, according to ECLAC data, foreign direct investment (FDI) in the region was US$ 142.794 billion, 40.7% higher than in 2020. The 20 largest deals totaled US$18 billion and occurred in Brazil, Chile, Colombia, Guatemala and Mexico last year.
Although the pace of mergers and acquisitions has improved in the region, 2022 was a challenging year due to high interest rates and a lower flow of liquidity to emerging economies. In the region, the total amount of these cross-border deals increased from an annual average of US$7 billion between 1990 and 2002 to US$54 billion between 2003 and 2021, according to ECLAC figures.
Brazil was the country that saw the most money in mergers and acquisitions between December 31, 2021 and December 26, 2022, reaching US$ 54.9 billion, according to Bloomberg figures. However, this figure represented a 41.9% drop compared to the same period in 2021.
When dissected by sector, finance and basic materials companies had the largest weight in this type of contracts in Brazil. They reached US$14.4 billion and US$11.4 billion, respectively.
“There is no hiding the fact that deal activity has been challenging in 2022. However, there have been some bright spots, such as ongoing activity in the life sciences sector, where we continue to see cash-rich giant companies acquiring smaller targets in the early stages of innovative drug or device development,” Andrea Guerzoni, global vice president of strategy and transactions at EY recently told Bloomberg.
Chile saw the second highest amount of resources mobilized in this type of contracts, reaching US$ 14.9 billion in the same period of time and with a year-on-year growth of 115.3%, one of the highest variation rates for countries whose deals totaled more than US$1 billion in the year.
Chile’s utilities and financial sector companies did business of this type for US$ 2.9 billion each.
Argentina also saw inter-annual growh; although it only had business for US$ 4.4 billion, the figure was 34,1% higher than 2021.
According to the Executive Secretary of ECLAC, José Manuel Salazar-Xirinachs, the monetary policy responses adopted worldwide in 2022, in a context of rising global inflation, “have caused increases in financial volatility and levels of risk aversion and, therefore, have induced lower capital flows to emerging economies, including the economies of the region,” he said recently when presenting the report Preliminary Balance of the Economies of LatAm 2022.
On the other hand, Mexico and Colombia had a reduced performance this year, because although they had M&A deals for US$ 12.2 billion and US$ 5.9 billion, respectively, they presented a drop of 51.8% and 39.7%, each one.