Read the full chapter: 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.
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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