Latin America sees sharpest drop in global M&A

Latin America and the Caribbean recorded the sharpest year-on-year drop in M&A of any region in the world during the second quarter of this year, according to a report by law firm White & Case

The region’s economies have been severely affected by the lockdown measures imposed in March in a bid to contain the COVID-19 pandemic, and which in some countries are still partially in place, such as Argentina, Chile and Peru. 

Latin America is currently the worst-hit region by the pandemic, with the death toll in Brazil currently at 104,000, at 54,666 in Mexico, and 21,733 in Peru.

Across the region, deal value crashed by 95 per cent in comparison with the second quarter of 2019, while volume fell by 61 per cent, to $1.1 billion in a total of 64 transactions, the report states. 

In contrast, Asia saw the least steep drop in M&A during the quarter, where there were 830 deals worth a total of $114.6 billion, a 19-per cent and 11-per cent drop respectively, with values buoyed in part by large TMT transactions in China, such as the $7.6 billion take-private offer for 58.com, a New York-listed Chinese online classifieds portal. 

Globally, the first six months of 2020 has also registered a massive drop in M&A activity, the report states.

The total value of deals announced in first half, both completed and pending, was $901.7 billion, a 53-per cent drop on the same period of 2019, while volume fell by 32 per cent year-on-year to 6,943 deals, the lowest half-yearly total since the first half of 2013.

“Looking only at the second quarter, when the extent of the pandemic became clearer around the world, the collapse in dealmaking was even starker. Total M&A value came to only $309.2 billion—a 69-per cent drop on the same period the year before, and the lowest quarterly total on Mergermarket record since 2006. Volume figures fared somewhat better, falling 49 per cent year-on-year to 2,634 deals, the lowest quarterly total since third quarter of 2009,” according to the report. 

Nevertheless, there are reasons to hope that the worst is over for global M&A, the report states.

“Stock markets have recovered strongly—although these gains may be out of touch with underlying economic data—and M&A data in second quarter shows a month-by-month increase in both volume and value. June 2020 recorded 912 deals globally, worth 131.4 billion. Although this was significantly below the 1,755 transactions in June of the previous year totaling $446.2 billion in value, it represents a 6 per cent rise in volume and a 43 per cent increase in value on May, which itself registered a small rise in M&A compared to April.”