S&P Expects Merger Activity to Pick up in The Americas This Year - A Look at the Sectors

NEW YORK, April 12, 2013 /PRNewswire/ -- The pace of M&A activity in the Americas is expected to pick up this year, according to two reports published today by Standard & Poor's.    The reports, "Economic Growth and Opportunities in Several Markets Will Fuel M&A Activity in Latin America" and "North American M&A Outlook Sector-by-Sector" can be found at ratings.standardandpoors.com/corporates/mergers-and-acquisitions.html.

Latin America

As global economic conditions gradually improve, leading Latin American companies are expected to use the ample liquidity on their balance sheets to take advantage of low valuations of distressed competitors in the region and abroad, according to  "Economic Growth And Opportunities In Several Markets Will Fuel M&A Activity in Latin America."  The report says that the M&A volume remains intense in Brazil, Mexico, and Colombia, even if at lower levels than the historically high levels of 2010 and 2011. 

M&A transactions over the past three years have been primarily made through cash in hand or stock, the report says, and there generally has not been an impact on credit quality, although that may not necessarily continue.

"Given currently low interest rates, expectations for economic growth, and some attractive valuations of target companies, Latin American companies may turn more aggressive in their expansion strategies, says Eduardo Uribe-Caraza, managing director and author of the report.   "If they pursue large, debt-funded acquisitions, this could bring a deterioration in their liquidity and overall financial risk profile, leading to possible downgrades."    

Outbound activity by Latin American companies purchasing operations abroad, has also been significant, as some of the large regional players, attracted by low equity valuations and business diversification, have sought expansion primarily in the U.S. and Europe.   

Sectors in which we expect further M&A activity in Latin America include:

-Telecoms, following the trends of rising demand and convergence with media and data services companies.  

-Consumer products, spurred by consolidation in the non-alcoholic beverage and food processing industries

-Financial services, as some European banks divest of certain Latin American assets to support capital at the parent level. 

North American Sector-by-Sector

We believe that a revival in transaction levels and volumes is dependent on continued positive momentum in the U.S. economy and the eurozone economic and banking difficulties not deteriorating materially.

"If this positive scenario for M&A were to play out, U.S. industries in which we would expect to see an elevated level of M&A in 2013 include technology, telecom, energy, and health care," says David Wood, managing director in the Corporate Ratings Group of Standard & Poor's  "Growth in gaming activity across states should lead to increased M&A in that sector as well. In Canada, we expect the mining industry to be very active this year, as it was in 2012."

The reports on Mergers & Acquisitions are part of a series of articles collected under the  title "The Credit Cloud" which provide insight on the competing forces that can influence corporate credit quality and alter the fragile equilibrium that currently exists in the global corporate credit landscape.

The reports are available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to [email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

SOURCE Standard & Poor's