A recent study by Baker & McKenzie looking at cross border M&A activity indicates that such deals should continue to increase over the next three years. According to the study, after a long and stuttering recovery from the 2008 global financial crisis, transactional activity should increase at roughly 2.9% per year; an acceleration over the 2.5% growth rate since 2012.
The study, done in conjunction with Oxford Economics, indicates that global equity markets should increase by 18% over the same three year time frame.
“Many US and European companies have accumulated large cash balances available for acquiring new businesses,” explains Tim Gee, Baker & McKenzie’s global head of M&A. “Financial sponsors also have the potential to boost global transactions, with private equity firms sitting on a record USD1.1 trillion in uninvested capital. Cross-border transactions will play a significant role as companies look to gain market presence in high growth markets.”
“Although the Colombian economy is still regarded with some trepidation, mergers and acquisitions have been one of the major business drivers of the country’s financial sector in recent years. From our perspective, we note that foreign investment and large private equity funds continue to show great interest in Colombia as one of the main investment destinations in the region and this contributes to the global movement of transactions, as we have seen in our firm, “said Jaime Trujillo, Managing Partner of Baker & McKenzie.
According to Lorenzo Garavito, President of HBI Investment Banking, “the outlook for private transactions, mergers and acquisitions is very favorable both in Colombia and in the region. Private equity funds are allocating very substantial amounts of their investment portfolios, and looking very favorably at the entrepreneurial activity here in the country.”
The report also notes that developed economies will support the buy side of M&A activity, while many smaller economies or emerging markets will experience the most significant growth as destinations for these M&A dollars, for example Andean countries such as Colombia, Chile, and Peru, or perennial North American juggernaut, Mexico.
“According to projections more focused in our region, Colombia remains a very attractive investment destination. In the case of Baker & McKenzie, mergers and acquisitions will continue to remain a major source of business both locally and internationally, since our firm is number one in cross-border M&A transactions. In 2014, the company had one of its best years in Colombia, reachiing a growth rate of over 30 percent, underpinned by the good environment for buying and selling companies in the country” concluded Trujillo.