Navigating An Emerging Market As M&A Deal Activity Continues To Rise In Latin America

Spike in Latin America deal activity in the first quarter of 2016, with inbound values rising 70 percent over the same period in 2015 Dealmakers need to know their jurisdiction and take a tailored approach Handbook provides insight from a global and local perspective, covering seven jurisdictions At a time with M&A deal activity continues to rise in Latin America, Baker & McKenzie has released its first edition of its Latin America M&A Handbook to provide an overview of the key legal considerations for dealmakers. Despite fluctuations in exchange rates, commodity price adjustments and political changes, Latin America saw a spike in deal activity in the first quarter of 2016, with inbound values rising 70 percent over the same period in 2015.

Activity has been driven largely by a strong US dollar — with investors seizing opportunities to acquire assets at good prices — and the reorganization in the oil and gas sector that came about as a result of lower commodity prices.

"Whether these drivers continue to fuel deal activity in the region remains to be seen. What's clear is that Latin American markets are continuing to evolve, and offer opportunities to investors taking the long-term view," says Jaime Trujillo, Chair of Baker & McKenzie's Latin America M&A and Private Equity Practice.

For investors willing to take the long view, compliance has become a major concern given Latin America's struggles with corruption. Buyers are placing much greater emphasis on compliance due diligence and the risk of succession liability has scared off some investors altogether.

"In Brazil, compliance is the name of the game at the moment," says Anna Mello, an M&A partner at Trench Rossi e Watanabe, a Brazilian firm with a cooperation agreement with Baker & McKenzie. "We have to structure deals in a way that mitigates compliance risk, which is not easy to do and makes the transactions more complex.

Subsequently, private equity firms are likely to drive more deals in the coming year, as they are often willing to assume more risk than other acquirers.

"We view private equity as a countercyclical factor in Latin America because they are serial dealmakers, with finite investment periods, who are obligated to do deals one way or the other. In a region as diverse as Latin America, there's no...