Spike in Latin America deal activity
in the first quarter of 2016, with inbound values rising 70 percent
over the same period in 2015
Dealmakers need to know their
jurisdiction and take a tailored approach
Handbook provides insight from a
global and local perspective, covering seven jurisdictions
At a time with M&A deal activity continues to rise in Latin
America, Baker & McKenzie has released its first edition of its
Latin America M&A Handbook to provide an overview of the key
legal considerations for dealmakers. Despite fluctuations in
exchange rates, commodity price adjustments and political changes,
Latin America saw a spike in deal activity in the first quarter of
2016, with inbound values rising 70 percent over the same period in
Activity has been driven largely by a strong US dollar —
with investors seizing opportunities to acquire assets at good
prices — and the reorganization in the oil and gas sector
that came about as a result of lower commodity prices.
"Whether these drivers continue to fuel deal activity in
the region remains to be seen. What's clear is that Latin
American markets are continuing to evolve, and offer opportunities
to investors taking the long-term view," says Jaime Trujillo,
Chair of Baker & McKenzie's Latin America M&A and
Private Equity Practice.
For investors willing to take the long view, compliance has
become a major concern given Latin America's struggles with
corruption. Buyers are placing much greater emphasis on compliance
due diligence and the risk of succession liability has scared off
some investors altogether.
"In Brazil, compliance is the name of the game at the
moment," says Anna Mello, an M&A partner at Trench Rossi e
Watanabe, a Brazilian firm with a cooperation agreement with Baker
& McKenzie. "We have to structure deals in a way that
mitigates compliance risk, which is not easy to do and makes the
transactions more complex.
Subsequently, private equity firms are likely to drive more
deals in the coming year, as they are often willing to assume more
risk than other acquirers.
"We view private equity as a countercyclical factor in
Latin America because they are serial dealmakers, with finite
investment periods, who are obligated to do deals one way or the
other. In a region as diverse as Latin America, there's no
one-size-fits-all approach to doing deals. A tailored approach with
a thorough understanding of your target, the jurisdiction you
invest in, the counterparties you deal with, and the local rules,
business and cultural nuances, come into play — these make
all the difference," Mr Trujillo adds.
The Latin America M&A Handbook provides insight from a
global and local perspective, covering seven jurisdictions where
the Firm has local teams with extensive expertise and a nuanced
understanding of local business law.
While Brazil and Mexico had the highest number of inbound deals
in 2015/16, the Handbook highlights that free market policies are
in place in Chile, Colombia and Peru, while Argentina is headed in
a similar direction, with Mexico's regulatory reforms encourage
deal activity. Industrial and commercial activities in Venezuela
may be carried out in virtually any form, ranging from an
individual entrepreneur to all forms of legal entities. The higher
spending power of a growing middle class has fuelled investments in
consumer-facing industries, while opportunities arise in the
infrastructure sector as some countries modernize their
"We understand the factors that contribute to or impede
deal success and can help simplify complexity in financing,
execution and post-deal integration. With more than 160 M&A
lawyers in the region, we have a proven track record in achieving
results on complex cross-border M&A deals even under tight time
constraints, in sectors including consumer products, energy,
financial services, healthcare, insurance, mining, retail,
telecommunications and others," added Mr Trujillo.
To obtain a copy of the Latin America M&A Handbook, please
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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