KPMG survey reveals growing M&A opportunities in Latin America

45% of investors believe the opportunity for M&A in the region has never been greater

NEW YORK, June 12, 2023 /PRNewswire/ -- According to the global report "In an Uncertain World, Latam M&A Is on the Rise" from KPMG LLP ("KPMG U.S."), an audit, tax and advisory firm, global investors are feeling optimistic about deals in Latin America, with 51% expecting to make four or more deals within the next two years. And it is not just the number of deals that is expected to rise; 48% of respondents expect the value of deals to increase also. Launched today, the report examines the M&A landscape in Latin America and ways for investors and companies to capitalize on the growing opportunities.

"The opportunities for M&A in Latin America are plentiful, and successful execution of these transactions relies heavily on having deep expertise of local cultures, customs and regulations that can otherwise take investors by surprise," says Jean-Pierre Trouillot, partner and Latin America Deal Advisory & Strategy leader at KPMG U.S. "A lack of this knowledge can certainly present some risks. But with the right due diligence and good governance, the rewards can be significant."

While four in five respondents say their most recent M&A deal in Latin America was successful, the process is not always easy. Respondents rated good corporate governance (63%) and high-quality financial information (62%) as crucial factors for a successful deal, but unreliable information make these factors difficult to determine.

Trouillot says, "A shareholder-oriented corporate governance model is what shapes Latin America's corporate culture. While more information is being disclosed by companies across the main markets in the region, the level of comparability and the quality of data remain uncertain, and there is an absence of international reporting standards. Therefore, effective governance processes, such as having an audit committee and maintaining independent members on this committee, promote trust among shareholders and other stakeholders."

Carole Streicher, KPMG U.S.'s Head of Deal Advisory & Strategy, said: "The findings of this survey really resonated with what we're hearing from clients and seeing in the market. Interest in Mexico is high as U.S. companies divest overseas assets and bring their supply chains closer to home. With AI on the rise and two-thirds of U.S. executives believing generative AI will have a high impact on their organization, it was no surprise to hear that the technology sector is most attractive for investment."

Additional key survey findings:

Opportunities for M&A in Latin America have never been better

• 45% of respondents think the opportunity for M&A in the region has never been greater. But they are not blind to the risks, with 35% saying it has never been riskier.
• The respondents' most common reasons for M&A deal-making in Latin America are (1) the opportunity to enter new markets, (2) growth opportunities in specific sectors, (3) opportunities arising from general economic growth, (4) the opportunity to diversify exposure to risk and (5) the quality and value of the workforce.

Growth and diversification are driving M&A activity

• Deals of all kinds are on the rise in Latin America. Most respondents anticipate a rise in many deal types, coming from both inside and outside the region, in the next two years.
• Global investors from outside the region are more optimistic about the prospects of M&A in Latin America: 61% expect an increase in the number of deals, compared with 43% for those inside the region. Additionally, 53% of outside investors expect an increase in deal values, while only 40% within the region share the same sentiment.
• 80% rate their most recent deal in the region a success.

Mexico and Technology most attractive

• Mexico leads Brazil as the most attractive country for M&A in Latin America, with 79% of respondents rating it as an attractive place to do business, compared with Brazil's 69%. Costa Rica ranks third with 54%. This is significant because Brazil has traditionally led as the most attractive nation for M&A.
• Respondents expect technology to see the most M&A activity in the next two years, followed by financial services, energy, agriculture then manufacturing.

KPMG Mexico's Head of Deal Advisory & Strategy for the Mexico and Central America Region, Ignacio García de Presno, says, "Mexico taking the lead as the most attractive nation for M&A activity could indicate a shift in investors' preferences, as Brazil has traditionally been the most alluring country for M&A due to its size, stability, natural resources and strategic location."

Methodology
In March and April 2023, KPMG carried out research into M&A trends in Latin America. It surveyed 400 business leaders who have been involved in M&A investments worth more than U.S. $50 million in the past five years or have advised on such an investment in any capacity over the same period. Respondents included private equity investors, venture capitalists, corporate executives and M&A advisors. They worked in a range of sectors and came from 14 countries.

About KPMG LLP

KPMG LLP is the U.S. firm of the KPMG global organization of independent professional services firms providing audit, tax and advisory services. The KPMG global organization operates in 143 countries and territories and has more than 265,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

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SOURCE KPMG LLP