L.E.K. Consulting looked at more than 15,000 M&A transactions that were completed over the past 10 years to provide insights into Latin America’s (LatAm) M&A activity.

M&A evolution

The volume of M&A transactions in Latin America was mostly stable from 2013 to 2021, with a typical transaction count of 1,500-1,600 per year. This volume of transactions remained steady even during COVID (2020-21), but it started to decline in 2022 and showed a strong contraction in 2023, to around 770 transactions. There is no single reason for this decline, but the four critical issues we identified are higher interest rates, geopolitical tensions (within and outside LatAm), sector-specific issues (tech, healthcare) and credit restrictions in Brazil (caused by the collapse of Lojas Americanas).  

The other highlight for the region is the growing importance of venture capital (VC) and private equity (PE) capital. In 2023 VC/PE represented around 30% of the transaction count, up from a 10%-15% share 10 years ago. The VC/PE sector has showed the strongest growth in Mexico, even though the situation is difficult for the funds now, given political uncertainty and poor exit prospects.  

Looking ahead, we are positive about the prospects for 2024. Many of the challenges that the region faced in 2023 are being addressed during 2024. Interest rates are going down, credit restrictions are easing and key sectors are getting in shape. We believe 2024 will be a much better year, probably a bit below the overall 10-year trend but better than 2023.

Brazil — consistent volume

Brazil consistently executed 35%-55% of all transactions in LatAm over the past decade, reaching its peak in 2020-21, driven by heightened confidence due to perceptions of diminishing country risk and positive economic trends. Technology, healthcare and real estate were the key sectors driving this growth, while other sectors remained stable. For example, healthcare alone saw a more than 180% increase in transactions during 2020-21.  

In 2022-23 there was a downturn in transaction volume, reaching its lowest numbers in ten years. These sectors, key for the 2020-21 peak, were severely impacted in 2023 for different reasons and reached their lowest levels in a decade. Technology was impacted by growing concerns regarding the viability of several new business models and tech unicorns. Healthcare was heavily impacted by the aftermath of COVID, which pressured payers and — as a result — the rest of the value chain, significantly reducing deal flow. Companies such as Red D’Or, DASA and Hapvida/GNDI, strong acquirers during the previous years, had to take a break in 2023 to improve their results before getting back to additional acquisitions. Other sectors, such as industrial and chemical products, proved to be more resilient and kept their relevance in Brazil.  

VC and PE also increased in importance for those sectors over the period, going from approximately 15% of the deals in 2013 to around 30% in 2023.  

Mexico — peaks and troughs

As in Brazil, VC and PE increased strongly in importance during the period, from around 10% in 2013 to almost 50% of the transactions in 2023.  

Other LatAm countries

In Colombia, total volume also went down in 2023, by 40% compared with 2021. Oil, gas, energy and mining have been declining in importance compared with healthcare, technology and consumer goods. Similar to Brazil, technology and healthcare faced strong contractions over the past few years, with potential healthcare reform being an obstacle to deals during 2023. On the other hand, VC and PE grew strongly in Colombia, from about 10% of the deals in 2013 to approximately 40% in 2023.

Chile and Peru showed the same reduction in 2023 (45% and 24%, respectively) and a growing importance of VC and PE in both countries (from 5% to 30% in Chile and from 10% to 20% in Peru).

In Argentina, the highlights are the importance of oil, gas, energy and mining, with limited VC and PE activity comprising just 10%-15% of the market.

To learn more, please download our analysis.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2024 L.E.K. Consulting LLC

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