Acquisition Finance in Latin America: Navigating Diverse Legal Complexities in the Region

The continued demand by private equity and sophisticated strategic investors for loans with "certain funds" or "SunGard" limited conditionality to finance their M&A activity in Latin America warrants exploring the impact of certain legal complexities in the region on such acquisition finance structures. M&A activity in Latin America appears poised for growth, accompanied by other local trends that suggest increased opportunities for international lenders financing M&A activity in the region, presenting opportunities for investors and lenders. For any given acquisition finance transaction in Latin America, the parties will need to consider country-specific concerns, including guaranty limitations and security steps and timing, applicable withholding tax regimes and exchange control regulations, to determine the optimal structure and lender syndicate composition for such transaction. ¹

M&A in Latin America

Latin American M&A in 2017 included 583 announced deals for a total of US$80.1 billion of value, which was an increase in value of 3.6%, although two fewer deals, in comparison to 2016, with many of the deals continuing to be driven by energy, mining and utilities.² These deals also included an uptick of announced deals in the agricultural sector, including 18 deals valued at US$2 billion (an increase of four deals and 160.1% in value over 2016) and the leisure sector, including 26 announced deals valued at US$985 million (an increase of seven deals and US$584 million over 2016).³ The Intralinks Deal Flow Predictor report predicts that the number of announced M&A deals in Latin America will increase in Q1 2018 by 3% year-on-year. And the International Monetary Fund is predicting that the GDP in Latin America will grow in 2018 by 1.9%, with country-specific variations (Argentina: 2.5%; Brazil: 1.5%; Chile: 2.5%; and Mexico 1.9%) and 3.5% growth projected in Colombia over the medium-term.⁴

¹ We would like to thank the following individuals for their contributions regarding the country-specific legal and market discussions included in this article: with respect to the discussion of Argentine legal and market matters, Juan M. Diehl Moreno, Partner, Marval, O’Farrell & Mairal; with respect to the discussion of Brazilian legal and market matters, Leonardo Baptista Rodrigues Cruz, Partner, Pinheiro Neto Advogados; and with additional input on Brazilian market matters from John Anderson, Partner, White & Case LLP; with respect to the discussion of Chilean legal and market matters, Diego Peralta, Partner, Carey y Cía. Ltda.; with respect to the discussion of Colombian legal and market matters, Juan Fernando Gaviria, Partner, Philippi Prietocarrizosa Ferrero DU & Uría - Bogotá; with respect to the discussion of Mexican legal and market matters, Raúl Fernández-Briseño, Partner, White & Case LLP; with respect to the discussion of Mexican tax matters, Guillermo Aguayo, Local Partner, White & Case LLP; and with respect to the discussion of Peruvian legal and market matters, Carlos Saco-Vertiz Tudela, Partner, Sacovertiz & Landerer Abogados.
² Global and Regional M&A Report FY 2017 by Mergermarket, An Acuris company.
³ Id.
⁴ World Economic Outlook, October 2017, "Seeking Sustainable Growth: Short-Term Recovery, Long-Term Challenges", dated October 10, 2017 by the International Monetary Fund.

Reproduced with permission from International Comparative Legal Guide to: Lending & Secured Finance 2018, Global Legal Group Ltd, London.

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