The shock of the global pandemic lasted only so long in the world of finance. Mergers and acquisitions activity in Latin America was blunted in 2020 as deal making went virtual, by and large, but activity began to pick up by the second half.  

The arrival of COVID-19 put mergers and acquisitions activity on hold in Latin America, with only well-advanced deals squeezing through to the finish line during the first half of the year. But as weeks of quarantine turned into months, and a return to a normal flow of business faded, investors put their heads down to hunt for opportunities in a disrupted world, especially in Brazil.

Data from Mergermarket shows 117 deals worth $16.7 billion in the region taking place during the third quarter compared with just 80 deals worth $1.3 billion in the second quarter. Still, year-to-date activity was down 60% by value compared with the same period of 2019, with just 343 deals taking place through September worth a combined $25.6 billon.

“As companies and deal practitioners adjusted to remote working, deals have become easier to strike than during the onset of the pandemic,” said Philip Segal, head analyst for the Americas at Mergermarket. “However, with restricted travel getting in the way of site visits and in-person meetings, the logistics of completing an acquisition remain a challenge.”

Data from another provider, Refinitiv, shows 1,043 deals worth $51 billion with involvement by either a Latin American acquirer or target year-to-date through November. By dollar value that’s about half the amount of M&A that Refinitiv tabulated in the same period of 2019.

“The whole world is sort of sitting on the fence, waiting to see how the chips fall. There will be a lot of opportunities.”     

José Antonio Contreras, Partner at WAMEX    

Even though conducting thorough due diligence on acquisition targets has become more difficult during the pandemic, some investors dedicated to the region have resumed travel. After all, funds have contractual obligations to find assets that can bring promising returns to their investors.

Perhaps counterintuitively, financial consultancy Duff & Phelps says there could be a record-high number of M&A deals announced in Brazil this year. The firm, which provides valuations for purchases, predicts more than 1,250 deals that involve Latin America’s biggest economy. That momentum has come amid record-low local interest rates, which have led Brazilian investors to take on more risk as they hunt for yield.

“M&A activity in Brazil bounced back quickly,” said Alexandre Pierantoni, managing director for mergers & acquisitions at Duff & Phelps in São Paulo.

The country’s capital markets experienced a boom year for initial public offerings, which creates a virtuous cycle of funding followed by yet more acquisitions to meet growth promises. Brazil has launched nearly two dozen IPOs during the pandemic, more than in any single year in over a decade.

Image: Alexandre Pierantoni


Whereas local investors have largely driven this year’s capital markets and M&A boom in Brazil, Mexican investors have been wary of putting more money to work in their country after President Andrés Manuel López Obrador quashed a series of private sector investments.

“The whole world is sort of sitting on the fence, waiting to see how the chips fall. There will be a lot of opportunities,” said José Antonio Contreras, a partner at WAMEX, a Mexican private equity firm that specializes in middle market investments.

Going forward, privatizations in Brazil and Colombia are expected to drive big-ticket M&A deals. In the case of Colombia, the government owns stakes in 105 companies that Mergermarket says combined are worth more than $45 billion. Distressed assets are also seen coming on the market throughout the region by the second half of 2021, as companies succumb to the economic pain of COVID-19, while multinationals will sell off underperforming assets to regroup.

There’s certainly plenty of cash earmarked for the region. Data compiled by the Association for Private Capital Investment in Latin America (LAVCA) shows that Latin America-focused private capital funds saw a 30% year-over-year increase for fundraising during the first half of 2020.

“A lot of the long-term investors are saying if you have the cash available now, if you have the dry powder, and there are a lot of funds with dry powder right now, it’s a great opportunity to invest in this cycle,” said Ivonne Cuello, chief executive of LAVCA, which has more than 180 member firms with combined assets under management in excess of $65 billion.

Blackstone-backed private equity firm Patria Investimentos raised a fresh $2 billion fund that closed in August. The infrastructure fund, Patria’s fourth, was almost double the size of its previous fund raised five years earlier. Patria has already set aside capital for a Brazilian solar and wind energy firm, a highway operator and a cellular tower company.

And in September, Advent International closed a $2 billion fund, its seventh-ever dedicated to the region. Over the past 24 years, the firm has invested or committed $6.8 billion in 64 businesses across Latin America and fully exited positions in 43 companies, including via nine IPOs.

The Advent Latin American Private Equity Fund VII (LAPEF VII) will target investments in Brazil, Colombia, Mexico and Peru across five sectors: business and financial services; healthcare; industrial; retail, consumer, and leisure; and technology.


Patrice Etlin, a managing partner at Advent in São Paulo and member of the firm’s global executive committee, said at the fund’s close that attractive valuations and positive, long-term market dynamics make for still-compelling investment opportunities in the region. 

Prior to the pandemic, much of Latin America boasted a rapidly growing middle class that fueled strong demand for value-added products and services. At the same time, many sectors in the region remain highly fragmented versus their peers in more-developed markets, with a comparatively large percentage of mid-sized businesses that are family-owned. That dynamic presents opportunities to extract value through consolidation and cost-cutting.

“Brazil has a vibrant private equity sector, and many invested companies were groomed to be IPO-material during the last five years.”

Jean Marcel Arakawa, Partner, Mattos Filho

Firms like Advent and Patria will be looking for exits from fresh investments in five or more years, by which time the pandemic will -hopefully- be a distant memory.

Image: Jean Marcel Arakawa

LAVCA data shows that exits continued even as the world shut down for COVID-19, with investors cashing out $5.1 billion during the first half of 2020. That made for the best first-half for exits on record since 2011, according to the association. The majority of those transactions took place through well-advanced sales to strategic investors, a segment that has largely turned its focus inward so as to stabilize their core businesses and survive the pandemic.

Divestments via capital markets though picked up in the second half, especially in Brazil, where Advent, Warburg Pincus and Patria all exited via IPOs.

“Brazil has a vibrant private equity sector, and many invested companies were groomed to be IPO-material during the last five years,” said Jean Marcel Arakawa, a partner in the capital markets practice at Mattos Filho, a Brazilian law firm that worked a majority of the IPOs that priced in Brazil during 2020.