There’s little doubt that Latin America’s M&A transactions have gained in sophistication and complexity in recent years. The winner of the award for M&A House of the Year believes this trend has helped boost its business in the region.
Goldman Sachs carried the category not only for topping M&A league tables – where it notched up a 10% market share by revenue, according to Dealogic – but also for advising on key transactions over the 12 months of the awards period. A year earlier, the bank didn’t even figure among the top five M&A banks in the segment.
Goldman also ranked second in the volume rankings with $12.1 billion worth of transactions, almost double the number posted in the previous 12 months on Dealogic data.
Head of M&A in Latin America Max Ritter says that the company’s M&A practice has benefited from the number of more structured and complex transactions that have emerged of late.
“One of the reasons we did quite well this year is because we helped clients find solutions away from 100% cash deals,” he says.
One example was the $2.8 billion sale in Mexico of Terrafina, a REIT, to Fibra Prologis in a competitive tender that attracted half a dozen bidders. Goldman Sachs advised Terrafina, which obtained a 35% premium over the share price when the process was completed.
“To our knowledge, Terrafina was the first ever multi-party tender offer done in Mexico,” Ritter says. “We had to go through a lot of hoops in terms of providing opinions and advice not just to the company’s board, but also to shareholders, as of how to deal with the specifics of a framework for which the Mexican market is not fully equipped.”
He believes that the growing sophistication is partly due to the ever more common participation of sponsors such as private equity companies in M&A deals in the region.
“Sponsors are becoming more creative in finding solution that maximizes optionality, especially with a region that is volatile by nature,” Ritter says. “They understand that there are other solutions that maximize value beyond the traditional cash transactions, and they are willing to try them.”
The fact that companies are no longer flush with liquidity is also motivating them to look for structures that involve the exchange of stocks or other solutions to make deals happen, notes Pedro Muzzi, the head of M&A in Brazil.
“Cash has become more expensive, and some structures make it easier to bridge valuation gaps then cash deals,” he points out.
Ritter adds that Goldman Sachs remains constructive about Latin America’s M&A market and the emergence of structured solutions should help unlock deals that would otherwise be hard to close on a full cash basis.