Interview with Paul Aversano

Global Practice Leader of the Transaction Advisory Group at Alvarez & Marsal

Latin America was one of the last regions to feel the full impact of the COVID-19 pandemic on M&A activity as a pipeline of transactions in countries such as Brazil helped cushion the blow.

“Even as late as April, the Latin American business was still going pretty strong even while we were probably down around 50 per cent in the United States and Europe,” said Paul Aversano, who founded and leads the Global Transaction Advisory Group at Alvarez & Marsal, a business consultancy in New York.

Halfway through the year, this all changed. By the end of the second quarter, Latin American M&A deal value plummeted to just $1.55 billion, or a stomach churning 95% lower than the same period in 2019, according to data compiled by Dealogic.

Since then, M&A activity has begun to pick up and the prospects look brighter for the rest of the year. Low interest rates, low inflation in the region’s biggest economies and relative political stability across the region are encouraging investors to dust off their expansion plans, according to Aversano.

Image: Paul Aversano

“We saw a big tail off, but we do see the business coming back. If you look at our business right now, particularly in Brazil, it’s coming back in a much stronger way… and we´re busier in Mexico than we thought we were going to be, so we’re bullish on Latin America,” he said.

Healthcare, telecoms, technology and oil & gas are sectors seeing most M&A activity, either already exceeding or on track to beat deal value from 2019, according to Dealogic.

“There are certain industries, such as technology and healthcare, that have actually benefitted during this period or, at the least, have not been negatively impacted,” said Aversano.

For other industries, Aversano notes that valuations, for the most part, have not come down significantly from pre-COVID-19 levels. Rather than bargain basement prices, it is a “scarcity of Alpha” and macro factors, such as low interest rates and currency devaluations, that is helping to drive M&A activity.

“There is so much dry powder and capital in the system that needs to be deployed [and] many of the investment firms who buy and sell companies for a living cannot just sit on the sidelines. There is still a pressure to buy and there is still pressure to sell,” he noted.