Colombia has been the target nation in 39 mergers and acquisitions since the start of 2015 with a total value of $5.6 billion USD, according to Baker & McKenzie. This makes the Andean nation the fourth most active M&A country in Latin America over the past five quarters, behind only Brazil, Mexico, and Chile.
And if the start to 2016 is any indication, the deal-making doesn’t appear to be stopping any time soon. In all of Latin America in the first quarter of 2016, inbound deal values reached $8.3 billion USD — a 70% spike over the same period last year, per the report.
In addition to currency and economic volatility being experienced throughout the region, Baker & McKenzie’s “Cross Border M&A Index” highlighted Colombia’s adoption of free-market policies as a factor in its ability to attract more M&A interest. A growing middle class in the nation of nearly 50 million people is another draw for investors.
“While Brazil and Mexico had the highest number of inbound deals in 2015/16, smaller countries like Chile and Colombia were close behind,” states the report. “Much of this activity is driven by growing demand from the region’s expanding middle class for consumer products as well as the business and financial services that provide the means to purchase them.”
The European Union and the North American have been the two regions responsible for the bulk of the inbound transactions in Colombia since the beginning of 2015, while the $5.2 billion USD coming from North America accounted for the vast majority of the value.
The first quarter results of 2016 are in line with earlier predictions from Baker & McKenzie about the potential for mergers and acquisitions in Latin America. And unlike in the past, foreign investors are looking beyond the traditional commodities sector while looking for regional companies to purchase. “Buyers are not only targeting the region’s energy and infrastructure sectors, but also pharmaceuticals, technology, finance and real estate,” states the report. “In 2015/16, consumer goods and financial services were the top two sectors targeted by investors in Latin America.”
In Colombia, the year kicked off with the high-profile, $2 billion privatization of public power utility Isagen in January. The Juan Manuel Santos administration took a lot of heat for the selling the electricity generator to Canadian company Brookfield Asset Management, a move several legislators and labor unions had tried to block throughout 2015.
Another headline-making merger was finalized in May when Denton’s, the world’s largest law firm by number of attorneys, acquired the Bogotá-based Cárdenas & Cárdenas, a firm that has been operating for more than a century. Denton’s had been eager to enter Latin America — the only region it didn’t have a presence in — and found ideal partners in Cárdenas & Cárdenas in addition to Mexican firm López Velarde. “This combination will provide us with a global reach and expertise that will benefit all of our current and future clients,” said Bernardo Cárdenas, the firm’s managing partner, when the deal was initially announced.
The national beer market has also been affected by the $100 billion USD beer merger sweeping the world. As a condition of Anheuser-Busch InBev and SABMiller combining forces, South American subsidiary Ambev SA will hand off its Colombian operations, which include Bogotá Beer Company, to its parent company. With this condition met, the Colombian regulator approved the deal in mid-May.
Another recent report, Merger Market’s “Latin American M&A Spotlight,” predicted that M&A activity is here to stay in Colombia for the near term — particularly when it comes to intra-regional deals. It surveyed investors and corporate executives focused on Latin America, and they predicted that Mexico and Central America would see the activity inside the region. After that comes Colombia.
“Northern Latin America was identified as the area where the most intra-regional transaction activity was likely to occur, with over two-thirds of the survey respondents identifying Mexico and other Central American countries as being the busiest centers for intra-regional M&A,” states the report. “Colombia was the nearest rival to the northern countries, and was identified by 48% of those polled as a target region for transactions within the continent.”
Colombia’s relatively positive regulatory environment was cited as one reason those outside the region will continue to prefer mergers there instead of complex locations like Brazil and Argentina. Overall, Colombia was ranked as the fourth most-favorable regulatory environment of the nations surveyed, behind Chile, Peru, and Mexico.
Photo: Jaime Trujillo, managing partner of Baker & McKenzie, speaks in Colombia.