Mergers and acquisitions. Argentine market warming

Following the massive relocation of multinational companies due to the pandemic and the local crisis, the companies’ buying and selling business has resumed moderate activity, with a 50% increase compared to the depressive numbers of 2021.

Forgotten two years later and marked by the departure of multinational companies, led by Walmart, Falabella and Latam, the local market for mergers and acquisitions has begun to show some positive signs. According to the report of the consulting firm KPMG, in the first quarter of this year there was a 50% jump in the number of M&A operations. Mergers and acquisitionsIe mergers and acquisitions) is the main driving technology of investments compared to the same period of 2021.

The Argentine economy is far from showing a radical change in the downward trend that began in 2019, and, in fact, this year’s growth can be explained, for the most part, by the poor basis of comparison, which was the 2021 market. However, analysts point to more reassurance. Data. “Transactions in the technology sector continue to be active with 45% of total operations. These are companies that have an export profile, a regional presence and that are able to attract the interest of international players, ”explains Federico Dias Asquenaga, Head of M & A-Deal Advisory at KPMG Argentina.

The current scenario, similarly, is far from the best moment the local economy is experiencing in terms of mergers and acquisitions.

“Apart from the improvement in the first quarter, we are at a very low level of activity, with a forecast of 70 or 80 operations throughout the year, which is a normal volume for stock time, but we should not lose sight of the fact. that In a good year, the Argentine market is one of 130 transactions“, Admits Dia Askuenaga.

1. Worst over (but not much to note)

The reactivation of the economy as a result of the dynamics of inflation and the need to escape from the peso of consumers has led to a “little summer” in some products that act as a shelter asset, thus awakening the appetite of the most daring investors. “There are a lot of people today who do very good business in electronics, white goods, tires, steel or cars. The cake does not grow, in some cases it is compressed, but the players are also smaller, so there is more opportunity to gain a share. And the level of profitability was very high again, “said Juan Pablo Ronderos, a partner at MAP Consulting.

“In any crisis, there is an opportunity for evaluation. Always. “Everywhere in the world,” said Isella Constantin, CEO of Service and Transactions Group (GST), one of the most active players in the merger and acquisition market and has completed acquisitions of Argentine companies in the last two years. SGR Fidus and Insurer MetLife. “Assets in Argentina are cheaper in dollars today. In our case, the shareholders are Argentine businessmen who have extensive experience navigating the country at different times.. So with experience and a desire to continue investing and focusing on the sectors, the group will continue to look for opportunities, ”the executive adds.

Isella Constantin:
Isella Constantin: “In Argentina today, assets are cheap, in dollars. In our case, the shareholders are Argentine businessmen who have extensive experience navigating the country at different times.

At Lazard Investment Bank they have a less optimistic outlook, but they acknowledge that the outlook is not as bad as it was a year ago. “We do not see many strategic M&A operations. “The market will continue to be depressed, but with specific operations at the regional level, which may have a foothold in Argentina,” said Matthias Eliashev, chief investment officer of the investment bank in Latin America.

2. Land of Opportunity

Beyond the troubled domestic economic situation, the market continues to offer opportunities for players who dare to deal with Argentine risk.

“In the face of the pandemic, the vast majority of companies chose to install the handbrake, and we decided to invest instead to look for opportunities. “We bought three companies in the region, two in Argentina and one in Peru,” said Alvaro Capobianko, chief executive of Norwegian software company Visma for Latin America.

The sale of Nike Argentina to the Panamanian group Harari meant the return of foreign investors to the local market.
The sale of Nike Argentina to the Panamanian group Harari meant the return of foreign investors to the local market.

“There are a lot of buyers at discounted prices and it is clear that this is a good time to buy cheap. “The key to doing business in Argentina is risk management knowledge, which is why local companies have an advantage,” they explain to MAP Consulting.

Investors also point out that measures that could a priori be seen as holding back business, such as restricting exchange rates or restricting imports, also imply opportunities for companies to better adapt to new economic rules. “There are subsidiaries of international companies that have limited access to the foreign exchange market to pay dividends to their parent companies, which are more actively involved in transactions as a means of using mobilized capital, which otherwise remains at risk of devaluation or inflation. “, Explained in KPMG.

A good example of the opportunities offered by the new scenario is the shoe business. “Just as international sports shoe brands have recently settled in Argentina, now is a different investment process. The business remains in the hands of local distributors, who become more professional and updated in this new market, ”explains Matthias Blanco, CEO of Blanco Group, one of the most active companies in the process of” nationalizing “international brands. By purchasing Havaianas, Diadora and LA Gear licenses in the field.

3. Return of foreign buyers (shy)

As part of a business reorganization process at the regional level, Nike completed the sale of its business in Argentina a few days ago. Several local players took part in the search for the buyer – such as Newsan (a reference in electronics and also in food production), Inverlat Investment Fund (Havana Owners) and GDN Group (which has already bought supermarkets). Walmart in Argentina) – but the final bid that won was an offer from the Panamanian group Harari, which has Nike and Zara licenses in several countries in the region. The acquisition by a foreign investor can be seen as a sign of a change in trend and a modest return to the interest of multinational companies in the Argentine market.

Alvaro Capobianco, CEO of Visma: "During the pandemic, the vast majority of companies chose to install the handbrake and we instead decided to invest in opportunities. We bought three companies in the region, two in Argentina and one in Peru.
Alvaro Capobianco, CEO of Visma: “During the pandemic, the vast majority of companies chose to install the handbrake and we instead decided to invest in opportunities. We bought three companies in the region, two in Argentina and one in Peru.

“International visits are starting to be seen again. “It is clear that Argentina is not on the list of any international companies that want to come to the region, but at the same time they know that very good business can be done here,” the MAP said.

“Regarding the origin of the buyers, In this quarter, they show an unusual profile with 80% of operations carried out by buyers from abroad, indicating a reversal of the trend observed in 2020 and 2021 with national investment leading the way.“- added the KPMG executive.

4. Technology is still a star

From M&A operations investigated by KPMG, Technology has accounted for almost half of the purchases and the prospects offered by the sector remain very promising.

“As a country, we are very far from the number of operations that were in 2016 or 2017, but there are always purchases of the company. Today we see great interest in everything that is technology. They may not be operations in large quantities and the average ticket is less than $ 30 million. Buyers are generally people from outside. “There are many companies from overseas that identify assets in the region, and local human resources are highly valued in a market where developers are a staple,” said Fernando Zopi, MHR Abogados’s partner at M&A, a leading specialist research firm. .

Another sector that is of the greatest interest globally is energy. In this area, the potential of the Argentine market is undeniable, although the local situation is not exactly in its favor when it comes to attracting foreign investors.

The Blanco Group, led by Matías Blanco, is one of the most active companies in the field of international brands
The Blanco Group, led by Matías Blanco, is one of the most active companies in the field in the process of “nationalizing” international brands by acquiring Havaianas, Diadora and LA Gear licenses.

“Energy is a sector that has entered the world with a very high level of activity, especially in renewable energy, and beyond the situation in Ukraine, it will continue to grow. “Similarly, these are transactions that require a long-term vision of rates, a regulatory framework and the possibility of repatriation of capital, but I find it difficult in the short term given the situation in Argentina,” Eliashev said.

The list of sectors that attract investors ends with mining and especially lithium, where certain operations have been carried out by international investors this year. Such as the Canadian Lithium South Development Corporation (which closed its deposit purchase in Catamarca) or the Australian Peninsula mines (which invests in Salta).

5. The speech of many is over

Nike’s departure was a pandemic, and it was even announced in February 2020 that a deal had been struck with Mexican company Axo, which ended in vain a few weeks later due to the spread of the corovirus. For this reason, the recently announced sale to the Panama Group can not really be attributed to the emergence of multinational companies that began in 2020 and whose most resonant cases were the departure of Walmart, Falabella and Latam Airlines.

Lithium is another sector that has sparked interest from Canadian and Australian companies
Lithium is another sector that has sparked interest from Canadian and Australian companies

“I do not see the main decisions, but these are not the conditions that create this situation. In particular, those who had plans to leave have already fulfilled them and it is also not a good time to start the exit process. And we must also remember that we are at the door of a new election cycle. Those who have come so far can wait a little longer and speculate on the prospect of change. ” Explained in Lazard.

“The balance sheet of many companies is still good today and this is forcing multinational companies to reconsider why they should go abroad. “I do not dare to say that there is no call to leave the country, but it is clear that there is no call to leave at these prices,” Ronderos explained.

Source: La Nacion

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