Intralinks tends to get an advanced view of how future deal flow will look. What is the outlook on Argentine deals over the coming 6 months? What trends can you spot using your platform?
As the world’s leading provider of virtual data rooms supporting M&A transactions, we have an unparalleled view into future M&A activity by region and sector. We publish these insights quarterly in our Intralinks Deal Flow Predictor report, which has been independently verified as an accurate predictor of future changes in the number of announced global M&A transactions. We can confirm a surge in early-stage deal-making in Argentina at present, meaning we should see a spike in closed deals in Argentina in the first half of 2017.
We are seeing a lot of early-stage activity in agribusiness – most likely due to the recent lifting of various export taxes – and energy, following the government’s announcement to increase renewable energy output to 8% of total power generation by the end of 2017 and to 20% by 2025.
By volume, there has already been an over 50% increase in energy deals closed in the first three quarters of 2016 versus the same period last year. Pampa Energia SA’s near US$900mn acquisition of Petrobras Argentina signifies that momentum in the Argentine energy sector is strong.
We are also seeing noticeable early-stage activity in the financial sector. The fact that all the major investment banks – UBS, JP Morgan, Banco Itau and more – are staffing up their deal teams in Buenos Aires is further evidence that a rise in Argentine deal-making is imminent.
How does Argentina compare to other countries in Latin America in terms of deal volume and sector strength? Which types of deals are being favoured?
Early-stage M&A activity in Latin America saw an incredible recovery in Q2 2016, growing by over 10% versus Q2 2015. Chile, Colombia, Peru and Argentina led this recovery. Brazil and Mexico, meanwhile, remain in stasis due to well-known internal and external forces. Collectively though, we are expecting a strong start to M&A announcements in Latin America next year.
Although closed deals in Argentina increased almost 50% versus the first three quarters of 2015, overall closed deal volume has declined 8% across Latin America. In terms of overall deal value, the difference is starker: Through Q3 this year, Argentina has seen a 200% increase in deal value year-on-year. Meanwhile, Latin American deal value dropped 6%.
Similarly to Latin America, the Argentine materials and energy & power sectors continue to reign supreme. These sectors will continue to prosper as the Macri-led government reverses populist-era economic policy whilst driving much-needed direct investment into infrastructure.
How have politics and political reforms altered the M&A landscape in Argentina? How will this evolve going forward? In which sectors are we likely to see the most M&A activity? Why?
Historical deal patterns from the first three months of 2016, combined with our own forward-looking data from the Intralinks Deal Flow Predictor confirm that Argentina has made a 180-degree turn since Macri took office. We are also seeing a noticeable uptick in interest in Argentine assets in our global deal sourcing network, Intralinks Dealnexus, that suggests Macri’s reform agenda is opening the M&A floodgates.
It is impossible to know how things will evolve. While the Macri government has won early victories in its dealings with the 2013 debt default, currency normalisation, and the repeal of key export taxes among other things, a number of complex yet critical policy battles remain, not the least of which is the contentious repeal of the previous regime’s generous energy subsidies, which was recently overturned by the courts.
Next year’s parliamentary elections will be a key indicator of whether the current M&A boom will be long-lasting. Over the medium-term though, we expect materials and energy & power M&A activity to grow further, as the market corrects years of neglect in power generation and infrastructure.
