Transactional Impact Monitor: Spain & Portugal – Vol. 4

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Transactional Impact Monitor: Spain & Portugal – Vol. 4

31 July 2020

TTR’s Transactional Impact Monitor (TIM) is a Special Report combining local knowledge and market visibility from top dealmakers developed to address extraordinary situations affecting the macroeconomic stability and M&A outlook in core markets

Sponsored by:

INDEX

SPAIN
– M&A Outlook
– Capital Markets
– Private Equity
– Handling the Crisis

PORTUGAL
– M&A Outlook
– Private Equity
– Handling the Crisis

– Dealmaker Profiles

SPAIN

On the cusp of Spain’s summer holiday season, the country confronts the reality that its fight against SARS-CoV-19 may be far from over. The streets of Madrid are once again full of pedestrians, who are now required to wear masks in public, as reported cases surge to levels not seen since the beginning of May. New infections are being reported mainly among younger Spaniards, however, and haven’t resulted in the same level of hospitalizations, according to the local press. 

The official death toll attributed to the novel corona virus stands just shy of 45,000, while in any given year, there are nearly 500,000 deaths overall in the country. Spain’s death rate has trended upwards over the past 10 years as the country’s population ages, with both cancer and circulatory system diseases each blamed for more than 100,000 deaths annually.

Nearly half of Spain’s autonomous communities are some semblance of normal, while the other half are considered high- or medium-risk by the authorities. Those who can work remotely, continue to do so across much of the country. 

Dealmakers in the transactional market have remained incredibly busy, and the pipeline is looking robust for 2H20, sources told TTR. The workload for legal advisor Uría Menéndez has been surprisingly heavy, given the low expectations earlier in the year, despite the poor visibility about what will happen in the coming months, Partner Tomás Acosta told TTR. 

Projections by the International Monetary Fund indicate a fall in global GDP of between 3% and 5%, while the Bank of Spain projects a 15% contraction in Spain, Acosta noted, but these figures too are in flux, making it difficult to predict what will happen by the close of the year. 

“What I do see, and this will be key, is the need for government authorities to react decisively to avoid any major resurgence,” Acosta said, noting the new outbreaks seemed to be under control, even as reported cases escalate once again.

“We are observing a window of opportunity in 2H20 in which dealmakers will try to make decisions and advance transactions before any potential new restrictions on economic activity are imposed later in the year,” Acosta added.

It won’t be until September or October that reality will set in, said Alantra Partner Alfredo Hernández, when companies will have three quarters of results to analyze. There will be a window between October and November to close deals, but the real boom will be in 1Q21, said Hernández. Alantra’s deal pipeline is stronger than it was at this point in 2019, Hernández said, but the type of deals has changed from overwhelmingly M&A-related to roughly half M&A and half financing transactions, he said.

When speaking with CEOs and CFOs, they are primarily concerned about their 2020 results, Hernández said. “The reality is that they still don’t know what the impact will be, though for those in the transportation and hospitality industries, the repercussions have been profound, and the impact is exceedingly clear,” he said.

There are already clear winners too, Hernández noted, citing the healthcare industry, certain consumer product segments and food production and distribution, which haven’t merely been resilient, they’ve growth by 20% to 30%. “All this has been made possible thanks to technology and communications, which have helped accelerate the existing trend of digitalization. “

Traditional retail, on the other hand, which was already suffering as e-commerce took at growing piece of the market, has been dealt a severe blow, Hernández noted. An acceleration of the migration online and away from brick and mortar among major retailers is a clear outcome of the current crisis, he said.

M&A Outlook
… Click here to access the fourth issue of Transactional Impact Monitor: Spain & Portugal – Vol. 4.

PORTUGAL

Portugal has registered a much lower toll from SARS-CoV-19 than its Iberian neighbor, with some 50,613 confirmed cases and 1,725 deaths attributed to the novel coronavirus. This hasn’t allowed the country to escape the devastating economic impacts associated with the pandemic threat, however, and the prospects for  the economy are grim as the country enters peak summer holiday season, dealmakers told TTR. 

“I am pessimistic about the economic outlook for Portugal,” said SLCM Managing Partner Luís Miguel Cortes Martins. “We are already seeing empty hotels; high-end restaurants also with very few clients. Many of them in fact reopened and then had to close again; that will generate a lot of unemployment and it will have a sharp impact on demand.”

The estimates for the Portuguese economy are not at all positive, Cortes Martins  noted, and that will, in turn, drive away foreign investment. “I don’t see a V-shape recovery for the Portuguese economy,” he said.

“If Spain has a quick recovery, Portugal will be better off, since they are our main commercial partner,” he noted, and Portugal is also subject to the form the recovery will take across Europe, generally, especially in Germany. “Tourism is a main driver in our economy, and no one really knows when that will recover,” he said. 

“I am somewhat pessimistic with regard to the economic outlook for 2021,” agreed EY Partner, Strategy and Transactions Miguel Farinha. “The pandemic’s economic impact will be greater than what most institutions, such as the IMF and the Bank of Portugal, are forecasting,” he cautioned. “Portugal will take a heavy blow, one which I think most people are not yet estimating correctly,” he said.

Portugal’s economy grew substantially in recent years, mostly thanks to its booming tourism sector, Farinha pointed out. Tourism typically represents about 15% of GDP in direct contributions and well over 20% including indirect contributions. The sudden flat line will bring severe economic hardship, he said.

Until a vaccine or some kind of treatment is made available, the downturn will persist, Farinha added. Notwithstanding his gloomy macroeconomic forecast, Farinha said the transactional market will be very strong, with a lot of very good acquisitions. 

M&A Outlook
… Click here to access the fourth issue of Transactional Impact Monitor: Spain & Portugal – Vol. 4.

Transactional Impact Monitor: Spain & Portugal – Vol. 4

Transactional Impact Monitor: Mexico – Vol. 2

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Transactional Impact Monitor: Mexico – Vol. 2

24 July 2020

TTR’s Transactional Impact Monitor (TIM) is a Special Report combining local knowledge and market visibility from top dealmakers developed to address extraordinary situations affecting the macroeconomic stability and M&A outlook in core markets

Sponsored by:

INDEX

– M&A Outlook
– Private Equity
– Capital Markets
– Handling the Crisis
– Dealmaker Profiles

On 1 July 2020, the United States-Mexico-Canada Agreement (USMCA) went into effect, replacing the North American Free Trade Agreement signed in 1994. The pact reset the commercial relationship between the three North American nations and reaffirmed Mexico’s preferential trade partner status. The visit of Mexican President Andrés Manuel López Obrador, popularly known as AMLO, to Washington a week later to celebrate the signing of the accord demonstrated that the relationship between the two nations isn’t as tenuous as either leader has depicted in their rhetoric, and underscored the co-dependence that unites both countries. 

In their response to the threat of a pandemic, the two leaders have exhibited a remarkably similar attitude: dismissive, contradictory and aloof. Both Mexico and the US have rapidly increased testing for Covid-19 in recent weeks, after initially limiting testing to government labs in March and April. Where the two countries have differed most in their response to the threat of pandemic, is in the release of public funds to shore up liquidity in the markets, with the US distributing trillions of dollars with little oversight or accountability, and Mexico essentially leaving the private sector to fend for itself. Concern over the impact of job losses on the economy is mounting in both countries, alongside a surge in announced Covid-19 cases that puts the US at the top of the chart, followed by Brazil, with Mexico seventh globally, according to official stats. 

The outlook at the beginning of 2020 was good, there was a lot of anticipation associated with the new free trade agreement between Mexico, the US and Canada, but there was also uncertainty, said Greenberg Traurig Shareholder Arturo Pérez-Estrada. The private sector was still jarred after Mexico City’s new airport project was scrapped, but there was cautious optimism after a slow year for M&A leading up to AMLO’s election, and the transactional market had begun to stabilize, with an improving pipeline of deals.

The private sector had a tough time shaking off the jitters after AMLO’s election, agreed fellow Greenberg Traurig Shareholder Víctor Manuel Frías Garcés, as Mexico’s largest companies are accustomed to a cozy relationship with government, and it quickly became apparent that this administration wouldn’t nurture such ties. 

The pipeline of new investments in the country was sparse, as foreign investors remained reserved, but companies that already had a presence in the country were sticking to their plans, Frías said. “We were facing an outlook of slow economic growth. The government’s policies were not directed towards the strata that promotes M&A,” Frías noted.

Since March, the economy has gone from slow to stagnant, overall, similar to what has happened in other markets, particularly in the US, and companies have become very conservative in the face of weak signals of support from the Mexican government, Pérez-Estrada said. The majority of companies have been reorganizing themselves and have put their expansion plans on hold, he added. “The signing of the new free trade agreement was good news, and of course there will be winners in the downturn, from e-commerce to last-mile logistics and manufacturers of health and cleaning products, but almost everybody else is facing obstacles and preserving cash,” Pérez-Estrada said.

M&A Outlook
… Click here to access the second issue of Transactional Impact Monitor: Mexico – Vol. 2

Transactional Impact Monitor: Brazil – Vol. 4

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Transactional Impact Monitor: Brazil – Vol. 4

23 June 2020

TTR’s Transactional Impact Monitor (TIM) is a Special Report combining local knowledge and market visibility from top dealmakers developed to address extraordinary situations affecting the macroeconomic stability and M&A outlook in core markets

INDEX
– M&A Outlook
– Private Equity
– Capital Markets
– Handling the Crisis
– Dealmaker Profiles

Three months after Brazil began to implement its patchwork response to the SARS-CoV-2 threat, dealmakers report widely varying levels of confidence in the strength of an economic recovery as the first half of 2020 draws to a close.

Despite the monumental level of public spending, Brazil has not yet been able to control the spread of SARS-CoV-2 and the death toll continues to mount, noted Lefosse Advogados Partner Carlos Mello. 

It’s been three months since Brazilians were encouraged to self-quarantine, some under more strict guidelines than others, depending on the measures deemed appropriate by state governors, who took the health threat more or less seriously, depending on their individual assessment of the risk and their political alignment with President Jair Bolsonaro. 

The authorities allowed many non-essential businesses to continue operating, including industrial production in São Paulo, Mello noted, which could have contributed to a delay in the number of reported Covid-19 cases tapering off.

Social distancing guidelines could be in effect in Brazil until September, and that will naturally create difficulties for the Brazilian market, said Mello, noting the real economy will suffer for a long time. 

We are still in uncharted territory, noted veteran investor and CIO of GOW Capital, João Tourinho, but Brazil is well positioned for a quick rebound thanks to the private savings accumulated over the past four years, that were channeled to corporates seeking capital, whether via the debt or equity capital markets. These savings, he said, have provided unprecedented levels of liquidity to the market, while financial technology has served as an efficient vector, making funding readily available and affordable to credit worthy enterprises. Combined, these factors represent a disruptive force, transforming the way business is carried out in Brazil, Tourinho said.

There is a clear split between the performance of companies that meet the basic needs of society, on the one hand, and those whose products fall under discretionary spending, according to Vinci Partners Head of Financial Advisory Felipe Bittencourt. Consolidation is very likely in those sectors suffering the most, including tourism, aviation, the auto industry, manufacturing and education, Bittencourt said.

Sectors that continue to perform well, meanwhile, include healthcare, services, food, cleaning products, e-commerce and agriculture, Bittencourt said. Deals in these sectors have been proceeding with minimal disruption, he noted.

Vinci closed two transactions following the mid-March lockdown in Brazil, with a third deal reaching an exclusive phase, he said. In the first deal, Vinci was advising a seller of a financial services company, and there was no need to renegotiate terms, he said. In the second deal, Vinci was advising the buyer and the deal value was renegotiated, he added. In the transaction pending close, Vinci is advising the seller in the sale of a construction materials company to a strategic buyer based in the EU. The seller has a specific use in mind for the cash and will exit the business completely, otherwise it wouldn’t have been a good time to sell, he said.

“As advisors we take a conservative approach, we do a lot of technical analysis,” Bittencourt said. “In a period like this, you run different scenarios, the negotiations take a long time.” For those sectors that are suffering, more analysis is required as there’s more risk involved in an acquisition, especially on the buy side, he said. Vinci has other deals underway in the healthcare space, financial services, cleaning products, tourism, automotive and manufacturing, he noted. 

Vinci is fielding calls related to new deal origination that can be split into two groups, Bittencourt said. On the one hand, local companies are studying partnerships, acquisitions and mergers to gain efficiencies and resolve capital structure weaknesses, he said. The economic fallout from measures imposed to mitigate the SARS-CoV-2 threat has accelerated these types of discussions, he said.

On the other hand, Vinci is fielding interest from international investors that have been looking at opportunities in Brazil for a long time and consider the currency depreciation advantageous, he said. “They believe it’s a good time to buy assets here for a decent price,” he said, noting those initiatives represented a confluence of the long-term view of these international investors and a situational opportunity.

All the firm’s non-strategic mandates with international financial sponsors, on the other hand, have been put on ice, he said. “They’ve frozen their operations in Brazil.”

Local private equity players, including Vinci’s own fund manager, remain active, however, he said. Local funds have been looking at opportunistic acquisitions while reviewing their own portfolios throughout the crisis, he said.

M&A Outlook
… Click here to access the fourth issue of Transactional Impact Monitor: Brazil – Vol. 4.

Informe Trimestral Chile – 2T 2020

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Las operaciones de M&A en Chile disminuyen un 37% en el segundo trimestre de 2020

  • En los seis primeros meses de 2020 se han registrado 79 transacciones por USD 1.483m
  • El sector Internet es el más destacado del semestre, con 13 operaciones
  • Operaciones de Venture Capital aumentan un 64% en el semestre
  • Transacción destacada: Sempra Energy vende el 100% de Chilquinta Energía y TecnoRed

Patrocinado por:

El mercado transaccional chileno ha registrado en los seis primeros meses del año un total de 79 fusiones y adquisiciones, entre anunciadas y cerradas, por un importe agregado de USD 1.483m, según el informe trimestral de TTR – Transactional Track Record en colaboración con Intralinks. Estas cifras suponen una disminución del 36,80% en el número de operaciones y un descenso del 65,14% en el importe de las mismas, con respecto al mismo periodo de 2019.

Por su parte, en el segundo trimestre de 2020 se han contabilizado un total de 30 operaciones con un importe agregado de USD 207,23m.

En términos sectoriales, el de Internet es el más activo del año, con un total de 13 transacciones, seguido por el sector Inmobiliario y el de Tecnología, con 11 operaciones en cada uno. Sin embargo, en términos interanuales el sector Internet ha registrado un aumento del 160% mientras que el sector de Inmobiliario ha disminuido su actividad en un 59%, y el sector de Tecnología ha aumentado en un 57%.

Ámbito Cross-Border

Por lo que respecta al mercado Cross-Border, en lo que va de año las empresas chilenas han apostado principalmente por invertir en México, con 6 transacciones. Por importe, destaca Alemania, con USD 330m.

Por otro lado, Estados Unidos es el país que más ha apostado por realizar adquisiciones en Chile, con 12 operaciones. Por importe, destaca de nuevo Estados Unidos, con USD 360,44m.

Venture Capital

Hasta el segundo trimestre de 2020 Chile ha registrado 23 operaciones de Venture Capital valoradas en USD 36m, lo que representa un alza del 64,29% en el número de operaciones y un descenso del 84,43% en el capital movilizado con respecto al mismo periodo del año pasado.

Asset Acquisitions

En el mercado de adquisición de activos, se han cerrado en el primer semestre del año 16 transacciones con un importe de USD 520m, lo cual implica un descenso del 38,46% en el número de operaciones y un descenso del 47,69% en su importe con respecto al mismo periodo de 2019.

Transacción Destacada

Para el segundo trimestre de 2020, Transactional Track Record ha seleccionado como operación destacada la venta del 100% de Chilquinta Energía y TecnoRed a SGID por parte de Sempra Energy, valorada en USD 2.230,00m.

La operación ha estado asesorada por la parte legal por Claro y Cía. Abogados; White & Case US; Carey y Paul, Weiss, Rifkind, Wharton & Garrison.

Ranking de Asesores Legales y Financieros

En el ranking TTR de asesores financieros, por importe, lideran hasta el segundo trimestre de 2020 RBC Capital Markets, con USD 283,00m. Por número de operaciones lidera Banco BTG Pactual, con 2 transacciones.

En cuanto al ranking de asesores jurídicos, por número de operaciones y por importe, lidera Carey, con 7 operaciones y un importe de USD 433,09m.

Informe Trimestral Argentina – 2T 2020

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Las operaciones de M&A en Argentina disminuyen un 30% en el segundo trimestre de 2020

  • En los seis primeros meses de 2020 se han registrado 52 transacciones por USD 622m
  • El sector Tecnológico es el más destacado del semestre, con 9 operaciones
  • Transacción destacada: Sumitomo Corporation cierra adquisición de sedes de Nufarm

Patrocinado por:

El mercado transaccional argentino ha registrado en los seis primeros meses del año un total de 52 fusiones y adquisiciones, entre anunciadas y cerradas, por un importe agregado de USD 622m, según el informe trimestral de TTR – Transactional Track Record en colaboración con Intralinks. Estas cifras suponen una disminución del 29,73% en el número de operaciones y un descenso del 75,57% en el importe de las mismas, con respecto al mismo periodo de 2019.

Por su parte, en el segundo trimestre de 2020 se han contabilizado un total de 21 operaciones con un importe agregado de USD 54,30m.

En términos sectoriales, el Tecnológico es el más activo del año, con un total de 9 transacciones, seguido por el sector de Petróleo y Gas, además del Financiero y de Seguros, con 6 operaciones cada uno. Sin embargo, en términos interanuales el sector Tecnológico ha registrado una disminución del 25%, así como el sector Petróleo y Gas con una caída del 40% mientras que el sector Financiero y de Seguros ha aumentado su actividad en un 50%

Ámbito Cross-Border

Por lo que respecta al mercado Cross-Border, en lo que va de año las empresas argentinas han apostado principalmente por invertir en Brasil, con 6 transacciones y con USD 26,92m.

Por otro lado, México, Austria y Estados Unidos, son los países que más han apostado por realizar adquisiciones en Colombia, con 3 deals, cada uno. Por importe, destacan Noruega y Países Bajos, con USD 355m.

Venture Capital

Hasta el segundo trimestre de 2020 Argentina ha registrado 14 operaciones de Venture Capital valoradas en USD 60m, lo que representa una tendencia estable en el número de operaciones y un descenso del 39,07% en el capital movilizado con respecto al mismo periodo del año pasado.

Asset Acquisitions

En el mercado de adquisición de activos, se han cerrado en el primer semestre del año 7 transacciones con un importe de USD 366m, lo cual implica un descenso del 61,11% en el número de operaciones y un descenso del 71,09% en su importe con respecto al mismo periodo de 2019.

Transacción Destacada

Para el segundo trimestre de 2020, Transactional Track Record ha seleccionado como operación destacada la adquisición de  varias subsidiarias de Nufarm en Latinoamérica, por parte de Sumitomo Corporation, valorada en USD 727,22m. La operación ha estado asesorada por la parte legal por Veirano Advogados; Arnold Bloch Leibler; Barros & Errázuriz Abogados; Brigard Urrutia; Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados; Norton Rose Fulbright US; Philippi, Prietocarrizosa Ferrero DU & Uría Chile Fe; y Marval O’Farrell Mairal.