LatinFinance - Special Edition - August 2013 - 18

1
THE
EVOLUTION
OF THE
MARKETS
1988-2013

the purchase, sale, merger, and
expansion of latin companies
today is unrecognizable from
a quarter century ago. Relative
economic stability and growth,
tamed inflation and better
resistance to global shocks has
meant keener foreign buyers,
local market consolidators and
the creation of latam regional
and global champions that
would have been unimaginable
in 1988.
in addition to more – and bigger – deals, many of the trends
bankers identify in the region
in the past two decades were
apparent in 2013: Brazilian
institutions continue to consolidate, regional leaders form, and
companies hunt for growth.
“there were a lot of multinationals making their first investments in the region,” says Jim
allen, head of latam m&a at
morgan Stanley, describing the
1990s. “they would typically
enter a joint venture or take a
minority stake.” most bankers
were gringos, he says, and they
had to be able to talk latam to
superiors and clients who knew
very little about the region.
now, of course, gringos are the
exception on teams stocked
with latam-born professionals.
Privatizations provided
ample opportunities in utilities
in the early days. US telephone
companies used excess cash to
buy into latin america, as did
europeans such as telefónica.
a group of 12 acquirers paid $19

The growing ability of Latin corporates to buy, sell and merge
with one another has paved the way for a new class of global champions –
unthinkable a quarter century ago. By Ben Miller

Mergers & acquisitions
One good turn
billion for the 12 pieces of Brazil’s telebrás in 1998. industrials
made moves, too. they joined
a handful of consumer-focused
companies that had been active
in the region through such arrangements for much longer.
“every large public services company from the US
was involved in certain latam
countries,” says Javier Vargas,
co-head of latam banking at
credit Suisse. “it was the most
important sector at that time.”
the US power sector suffered after enron collapsed
in late 2001. Some foreigners,
such as Duke energy, still have
holdings in latin companies,
but many have left.
Local drivers
Soon, latin american parties
became the active agents in
driving deals, and privatizations gave way to deals driven
by the private sector. the asian
crisis in the late 1990s slowed
the pace of deals, but deal flow
didn’t really suffer until the
early 2000s. Between 1997
and 2000 annual volumes of
deals with a latam component
ranged from $70 billion to $115
billion, according to Dealogic.
in Brazil, concerns over the
policies of president luiz inácio
lula da Silva after the 2002
election drove down prices,
and foreign investment slowed.
However, local money filled
the gap, and investment in the
region would pick up through

18 l atinfina nce.com - 25 Years - August 2013

2007-2008, lifted by favorable
commodity trends.
By 2006, some latam companies were large enough to
become acquirers themselves.
consolidations increased, and
some hunted abroad. Brazil’s
Vale turned heads when it paid
$18.7 billion for canadian global
miner inco, transforming itself
and the industry.
mexico’s cemex followed by
taking australian firm Rinker
and others including Bimbo

ROLL UP, ROLL UP: The merger
of Itaú and Unibanco in 2009
is part of a rapidly multiplying
trend for Latin M&A

THE NEXT CYCLE: The merger
of Itaú and Unibanco in 2009
is part of a rapidly multiplying
trend for Latin M&A

and Gerdau spread into the US.
this continues through 2013,
in the US and also in europe,
africa and asia. in the beverage
sector, stock-swap deals have
made latin americans important holders in global brands,
such as Heineken, aBinBev and
SaBmiller.
annual volumes of business
have hit new highs since 2009,
topping those seen in the mid2000s. last year’s $161 billion in
transactions followed a peak of
$221 billion in 2010, according
to Dealogic.
“the main events have been
a macroeconomic stabilization
which resulted in an increase of
consumers’ disposable income
and enhanced access to longterm funding, accompanied by
the development of local capital
markets on the back of pension
funds and local asset managers,” says lisandro miguens,
co-head of investment banking
for latin america at JPmorgan.
“these factors have been
constant and they will continue
to shape m&a deals down the
road.”
New chances
consolidation by local firms is
a clear trend, starting first in areas including telecoms, mining
and cement, but now appearing
everywhere. Retail, consumer
products, and financial institutions make many of the head-

Continued on page 20

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LatinFinance - Special Edition - August 2013

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