As equity issuance remains tough, investment bankers hope mergers and acquisitions will be an alternative for companies that want to bring in fresh capital. They also hope M&A can help offset the absence of large equity market fees.
Strategic investors from outside the region are taking a long view, say some — looking past short-term economic troubles and taking advantage in some instances of constrained financial positions locally.
Dealogic data for the first nine months of the year showed 4% growth in M&A revenue in Latin America compared with the same period in 2013, reaching $373 million. Announced deals led by buyers outside the region were up around a third, however.
Credit Suisse’s global network makes it well-placed to bring in foreign direct investors, while its local presence helps it advise on domestic deals. Partly as a result, it is at the top of the advisory league table for completed M&A deals by some distance.
In the 12 months to the end of September, Credit Suisse advised on deals worth $26 billion, compared with totals of $20 billion each by its nearest rivals, Citibank and Deutsche Bank. Credit Suisse also worked on 31 deals, twice as many as Citi or Deutsche Bank, which worked on 13 and 14, respectively, according to Dealogic.
Credit Suisse’s Latin America M&A team consists of five bankers in New York, two in Brazil, and one in Mexico, says Daniel Cavalli, managing director. The integration of his team with the bank’s global New York-based M&A team is an advantage, he says: “It played a role in our success.”
At the same time, Credit Suisse has been more committed to maintaining local operations and relationships than other global banks, Cavalli says. “Credit Suisse has a very local, Latin America-driven M&A business,” he says.
One example of global and local know-how, he says, is the $7 billion sale of the Las Bambas mine in Peru to a Chinese-led consortium, MMG. The deal was the biggest completed M&A deal in the period, according to Dealogic, and takes LatinFinance’s award for Cross-Border M&A Deal of the Year. Credit Suisse advised the seller, Glencore.
Credit Suisse led Glencore through its initial public offering in 2011 and its merger with Xstrata in 2013. Its Peruvian experience, including its involvement in mining privatizations in the late 1990s, made it even better qualified to advise on the deal.
The combination of global and regional networks played a part in other large deals, such as the $400 million acquisition of a 65% stake in Brazil’s Sudeste Superport by Trafigura and Middle East sovereign wealth fund Mubadala. Credit Suisse advised the seller, Eike Batista’s MMX.
Credit Suisse also advised a consortium of Brazil’s engineering and construction company Odebrecht and Singapore’s Changi airport in the $8.2 billion privatization of Rio de Janeiro’s Galeão aiport.
“We’re good at connecting distant emerging markets,” says Cavalli.
Meanwhile, local relationships were crucial to more regionally orientated deals, such as a $720 million US acquisition by Colombia’s Cementos Argos and the acquisition of a $1.8 billion real estate portfolio from Mexico’s MRP by local real estate trust Fibra Uno — another regular client of the investment bank. LF
WINNER: Credit Suisse