"Proceeds of IPOs and share offerings have financed acquisitions in a range of industries, such as healthcare, oil and gas, power, fintechs and retail", said Ricardo Bellissi, co-head of investment banking at Goldman Sachs in Brazil.
Even with Latin American equity markets hit by volatility, higher inflation and interest rates, especially in Brazil, where there is also a presidential election next year, most bankers do not expect a drop in near-term M&A.
After raising $25 billion in equity offerings this year and almost $30 billion last year, Latin American companies have strong cash positions to finance M&A.
"Even with higher inflation, interest rates rising and an election in Brazil next year, the deal flow is expected to remain strong", said Bruno Amaral, head of M&A at Banco BTG Pactual, Latin America's leader in Refinitiv M&A ranking through September.
Amaral is also optimistic about potential deals in Chile, one of the Latin American countries that best handled the pandemic, and Peru and Colombia, which like Chile are benefitting from high commodity prices.
The largest deal of the region so far is the proposed $9.5 billion takeover of NotreDame Intermedica by rival Hapvida SA, still under analysis of Brazilian antitrust watchdog CADE.
Other top deals included Univision's acquisition of Grupo Televisa's assets and the spin off of Brazilian retailer GPA SA's wholesale division Asai, with values close to $5 billion each.
Among the most active industries are healthcare, still very fragmented in the region, and fintechs, attracting a lot of investor interest as they grab a piece of a market long dominated by brick and mortar banks.
Privatization and infrastructure deals are contributing to higher deal values. The auction of state-owned water and sewer operations in Rio de Janeiro raised 22.6 billion reais and the sale of operator Oi's fiber and mobile units, almost 30 billion reais. In another upcoming transaction, America Movil is slated to spin off its Latin America tower business by year-end.
Sales of refineries by state-controlled oil company Petrobras and fiber units by Copel, Telefonica and TIM in Brazil are expected for the next months.
Cross border activity also picked up. "Brazilian companies are back to acquisitions abroad," said Luiz Muniz, partner and head of Latin America at Rothschild & Co, citing JBS unit Pilgrim's Pride Corp's 819 million-euro acquisition of Kerry Group Plc's British and Irish consumer foods units, among others.
SPACs, dealing with high target prices in North America are also focusing in the region, but have yet to announce a large deal.
Financial advisory is very active in Latin America, with 77% of deals above $100 million using financial advisors.
Even as Brazil's benchmark Bovespa index has fallen 5% this year and more than 50 companies decided to delay or cancel their IPOs, equity issuance was stable in the first nine months of 2021, with $21.12 billion in share offerings.
In Latin America as a whole, the total rose 12%, boosted by Mexican companies such as America Movil, which sold a $2.7 billion convertible bond, and Corporacion Inmobiliaria Vesta, and one issue from Uruguay.
Bankers say Brazilian companies are just waiting for a better period in equity markets to launch their offerings.
"Some companies can bring forward the timing of their deals to avoid unnecessary exposure to volatility, which might happen in an election year in Brazil", said Rodolfo Soares, Goldman Sachs's co-head of investment banking in the country.
The table below ranks M&A financial advisors in the region
Financial advisors ranking- Any Latin American involvement (Announced, Year to Date)
ADVISOR VALUE ($ billion) NUMBER OF DEALS
Banco BTG Pactual 31.16 55
JPMorgan 29.1 23
Itau Unibanco 24.38 34
Citi 19.64 15
Goldman Sachs 14.39 17
BofA 11.34 12
Santander 11.31 37
Morgan Stanley 11.19 9
Rothschild & Co 10.92 24
XP Investimentos 10.16 15
TOTAL 105.466 1,314
(Reporting by Tatiana Bautzer; Editing by Christian Plumb and Alistair Bell)
By Tatiana Bautzer