By Tatiana Bautzer

SAO PAULO, (Reuters) – Latin America saw a record number of mergers and acquisitions during the first nine months, exceeding $105 billion, Refinitiv data shows. This is due to large capital flows that fueled a deal frenzy.

Ricardo Bellissi (NYSE:), co-head for investment banking at Goldman Sachs, Brazil, said that “Proceeds from IPOs have financed acquisitions across a variety of industries such as healthcare and oil and gas.

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 also believes in potential Chile deals, as Chile is one of the best-managed Latin American nations. Peru and Colombia are both benefitting from the high commodity prices.

The region’s largest deal is currently the $9.5B takeover of NotreDame Intermedica from rival Hapvida SA. It remains to be analyzed by CADE (brazilian antitrust watchdog).

Another top deal was Univision’s acquisition by Grupo Televisa of assets, and the spin-off of Asai’s Wholesale Division of Brazilian retailer GPA SA. These deals have values of close to $5 Billion each.

The most dynamic industries include healthcare. Although it is fragmented, the sector has seen a significant increase in activity. Fintechs have also attracted investor attention as they are able to seize a portion of a long-dominated market by brick and mortar banks.

Higher deal values are being achieved through privatization and infrastructure transactions. Rio de Janeiro state-owned water systems and sewers were auctioned for 22.6 billion R$. Operator Oi sold its fiber and mobile units to raise almost 30 Billion R$. Another transaction is expected. America Movil (NYSE) plans to sell its Latin America tower business before the year’s end.

For the next few months, sales of Petrobras refineries and fibre units by Telefonica (NYSE) in Brazil and Copel are anticipated.

Also, cross-border activity increased. “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 (NASDAQ:) Corp’s 819 million-euro acquisition of Kerry Group Plc’s British and Irish consumer foods units, among others.

SPACs that deal with North America’s high-target prices are also looking to the region. However, they have not yet announced a significant deal.

Latin America is a very active market for financial advisory. 77% of transactions exceeding $100 million are made using financial advisors.

ELECTION VOLATILITY

Brazil’s benchmark index fell 5% and over 50 companies chose to postpone or cancel their IPOs. However, equity issuance was steady in the first nine month of 2021 with $21.12 million in share offerings.

Latin America’s total rose by 12% thanks to Mexican companies like America Movil (which sold a convertible bond worth $2.7 billion) and Corporacion Inmobiliaria Vesta (which issued one Uruguayan issue).

Brazilian banks say that they are waiting for the right period to get their offering on the stock market.

“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

Rating of Financial Advisors- Latin American Involvement (Announced Year To Date)

NUMBER OF DEALS: ADVISOR VALE ($ billion)

Banco BTG Pactual 31.16 55

JPMorgan (NYSE:) 29.1 23

Itau Unibanco 24.38 34

Citi 9.64 15

Goldman Sachs 14.39 17

BofA 11.34 12

Santander (MC:) 11.31 37

Morgan Stanley (NYSE:) 11.19 9

Rothschild & Co 10.92 24

XP (NASDAQ:) Investimentos 10.16 15

TOTAL 105.466 1 314

Source: Refinitiv