FROM STANDBY TO INFINITY: M&A MARKET TRENDS

Mergers and acquisitions in Spain and most of Latin America had an outstanding first half of 2022. Momentum in most of these markets helped maintain year-to-date record highs. However the pace in all markets gradually tapered off and ground to a halt at some point between July and December 2022. At the time it was considered a temporary and even positive pause, however apprehension has increased as the months proceed. 

Some in the market expect the paralysis to continue until macroeconomic transparency is restored and rate hikes come to an end. Major funds have not wasted time during this holding pattern. They have invested and updated their portfolios, including their most recent acquisitions, and are waiting for the sign to go because no one wants to be left behind. Most industry players and experts are already anticipating that 2024 could be another record year for investment.

There is consensus that recovery will not start simultaneously in all countries, nor will it progress at the same pace in different sectors and market segments. There is also consensus that a significant chunk of the current investment slowdown can be attributed to significantly gloomier forecasts than what we’ve seen over the past twelve months. Looking back over the last six months, growth in most European countries has been significantly higher than expected and energy prices have significantly improved.

Among experts and analysts, there is a growing sense that the economy is beginning to approach the last inflection point. Beyond this point there is not expected to be another increase, but instead a broad growth outlook where each fund will be able to seek its best opportunities. Most private equity firms already acknowledge having entered this new environment, although they also agree that they will have to continue being extremely selective, at least for the remainder of 2023.