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M&A in Latin AmericaAmericas regionAmericas Financial Advisory10th Edition – July 2018

© 2017. For information, contact Deloitte Touche Tohmatsu Limited.

Contents

Executive summary 3

2017-2018 M&A snapshot 4

Top deals in 2017-2018 5

Macroeconomic indicators 6

Geographical M&A activity 7-14

M&A activity across industries 15-20

Perspectives 21-22

Leadership contacts 23-25

Sources and presentation notes 26-30

2

© 2018. For information, contact Deloitte Touche Tohmatsu Limited. 3

The M&A activity in Latin America in 2017-18 was driven by the improving macroeconomic conditions, rising government support, and increasing consumption. The Energy, Resources & Industrials industry attracted significant investments (USD 84 bn)1 in 2017-18 because of the abundance of natural resources in the region. Brazil witnessed the highest number of deals (752)1 and accounted for significant investments (USD 83bn)1 owing to its reviving economy and vast consumer base.

Executive summary

• In 2017, the M&A activity in Latin America was driven by its improving economic growth and rising consumption. Rich natural resources, increasing disposable income, and government reforms further stimulated M&A activity in the region.1- 6

• Brazil’s growing GDP, increasing consumer spending, and business-friendly policies helped boost investor confidence, thus, attracting investments.2

• Mexico’s rising GDP growth, low wages, a relatively skilled workforce, and deep integration into the US value chain encouraged investment in this region.1

• The CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership) may facilitate the M&A activity in Latin America. 1-6

M&A trends in Latin America

• Over 2017-18, Energy, Resources & Industrials (ER&I) registered the highest M&A activity (deals worth ~USD 84 bn).1

• Consumer (CNSR) recorded deals worth ~USD 25 bn over 2017-18, owing to a rise in the disposable income.1

• M&A in Financial Services was primarily driven by the growth in the insurance sector. A deal worth USD15 billion was announced between XL group Ltd and AXA SA in this sector on May, 2018.1

• Growth in Technology, Media, and Telecommunications (TMT) was mainly attributable to a rise in IT consulting services.1

• The Life Science Healthcare sector is expected to be benefited by The CPTPP due to reduction of trade and regulation barriers.11

Industries

• In 2017-18, the majority of M&A activity in Latin America was intra-regional, with economies such as Brazil, the United States, and Mexico being the top investors, whereas, Brazil, Mexico, and Chile were top investor destinations.1

• Outside the region, North America (especially the United States) and Europe (countries such as France and Spain) were the top investors in Latin America’s inter-regional deals.1

Geographies

• Overdependence on commodities, and volatile oil and commodity prices could restrain the M&A activity in Latin America.1- 6

• Political uncertainties, corruption, and the lack of adequate infrastructure could also weaken market perception, thus, affecting the M&A activity.1- 6

• Uncertainty in decisions related to the NAFTA agreement may hamper investors’ confidence.1-6

Challenges

Click for contents page Refer to "Sources" section for citations.2018 includes data from January 1st , 2017 to May 31st , 2018


Latin America’s M&A deal inflow between January 1, 2017 and May 31, 2018 totaled to1,768 deals worth USD165.98 bn.

2017-2018 M&A snapshot1

4

Value (USD bn) Volume of deals

Top investor

companies

$21

1

$15

1

$11

2

$6

2Vale SA

$8

93

AXA SATelecom

Argentina SASuzano Papel e

Celulose SAInvestor Group

Top investorcountries

$66

567

$14

192

$8

127

$7

108

Brazil$13

114

United States CanadaMexico Chile

Top targetindustries

$84

530

$25

577

$43

357

$1

113

Energy, Resources & Industrials

$12

189

ConsumerLife

Sciences & HealthCare

Financial Services

Technology Media Telecom

Top destinationcountries

$83

752

$11

236

$16

164

$3

115

Brazil$12

162

Mexico ColombiaChile Argentina

Refer to "Sources" section for citations.Click for contents page2018 includes data from January 1, 2017 to February 28, 2018


Top deals in 2017-20181

5Refer to "Sources" section for citations.

Target Target industry Acquirer Acquirer industryValue of

transaction (in USD mn)

Valepar SA Energy, Resources and Industrials (ER&I) Vale SA Energy, Resources

and Industrials (ER&I) 20,957

XL Group Ltd Financial Services Industry (FSI) AXA SA Financial Services

Industry (FSI) 15,129

Fibria Celulose SA Energy, Resources and Industrials (ER&I)

Suzano Papel e Celulose SA

Energy, Resources and Industrials (ER&I) 10,673

Cablevision SA Technology, MediaAnd Telecom (TMT)

Telecom Argentina SA

Technology, MediaAnd Telecom (TMT) 5,874

Validus Holdings Ltd Financial Services Industry (FSI)

American International Group

Financial Services Industry (FSI) 5,565

Sociedad Quimica Y Minera De

Energy, Resources and Industrials (ER&I) Inversiones TLC SpA Financial Services

Industry (FSI) 4,066

Eldorado Brasil Celulose SA

Energy, Resources and Industrials (ER&I)

CA Investment Brazil SA

Financial Services Industry (FSI) 3,599

Petrobras- Roncador Field

Energy, Resources and Industrials (ER&I) Statoil ASA Energy, Resources

and Industrials (ER&I) 2,900

Banmedica SA Financial Services Industry (FSI) Bordeaux Hldg Spa Life Sciences and

Health Care (LSHC) 2,699

Enel Generacion Chile SA

Energy, Resources and Industrials (ER&I) Enel Chile SA Energy, Resources

and Industrials ER&I) 2,581

Click for contents page2018 includes data from January 1st , 2017 to May 31st , 2018


Macroeconomic indicators32

6

2018 macroeconomic indicators (forecast)

CountryNominal

GDP (USD bn)

Real GDP change per

annum(%)

GDP per head

(USD)

Inward FDI flow/GDP

(%)

Exchange rate

LCU:USD

Consumerprices

(% change per

annum)

Lending interest rate (%)

Argentina 597.0 2.3 13,359 2.2 26.99 28.8 29.6

Brazil 1,928.0 2.0 9,218 3.6 3.60 3.4 38.9

Chile 310.7 3.7 17,072 5.4 623.10 2.4 5.1

Colombia 341.3 2.5 6,900 4.3 2,924.00 3.3 11.9

Mexico 1,188.0 2.2 9,084 2.4 20.03 4.3 7.9

Peru 231.5 3.7 7,176 3.2 3.29 1.7 15.1

Click for contents page Refer to "Sources" section for citations.2018 includes data from January 1st , 2017 to May 31st , 2018


Geographical M&A activity


75 66 53 35 32

Australia Japan China Hong Kong Singapore

Intra-regional deals drove most M&A activity; North America and Europe lead in inter-regional deals

Latin America63.6%

Europe18.0%

North America12.1%

Asia-Pacific6.1%

Africa/Middle East0.2%

Deal value = USD 459

bn

3.4 2.4 1.2 0.9 0.5

Qatar Israel Mauritius Utd ArabEm

South Africa

11.0 10.2 8.1 4.2 2.3

Hong Kong China Japan Singapore Australia

Top acquirer nations by deal value (2014-18) in USD bn1

Top acquirer nations by deal volume (2014-18)1

Refer to "Sources" section for citations.8

20.510.6 8.7 7.7 5.1

France Spain UnitedKingdom

Italy Switzerland

153.8

39.7 29.9 14.4 10.0

Brazil Chile Mexico Argentina Colombia

19 17 10 6 2

Utd ArabEm

Israel South Africa Qatar Mauritius

169 145 121 80 72

Spain UnitedKingdom

France Switzerland Germany

1,723

670 449 363 298

Brazil UnitedStates

Mexico Chile Canada

*Includes 118 deals for which the acquirer nation is not disclosed.

Click for contents page2018 includes data from January 1st , 2017 to May 31st , 2018

Latin America, 3477

North America,

968

Europe, 887Asia-Pacific,

308 Africa/Middle East, 62

Deal volume* = 5,702


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Brazil is on a sustainable path with an optimistic economic outlook. GDP growth rate of 0.4% between January, 2018 to March, 2018 on a quarter-on-quarter basis was driven by lower inflation, stimulated monetary policy, fiscal initiatives, labor reforms, and a rebound in investment has also contributed.2,8,9

Brazil’s status as an investment destination is likely to be unaffected if structural reforms are implemented

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Possible Unfavorable factors for M&A

M&A deals in Brazil 2014-181

M&A deals in Brazil by investor country and target industry (2014-18)1

* United States** United Kingdom

Possible Favorable factors for M&A

Refer to "Sources" section for citations.Click for contents page

Brazil

• Brazil is on a path of economic recovery with improvement in private consumption and growth in industrial activities. In 2018, the average growth rate is estimated to be at 2% , which is significantly higher than the estimated figure in 2017(1%). Significant steps have been undertaken to stimulate the economy, like working on fiscal reforms for more capital inflows, better revenue performance, and tax simplification regimes to name a few.1

o As the economy gains momentum, stimulated monetary policy (lower policy interest rates) is expected to improve consumer confidence and will likely further drive credit demand. This should lead Brazil towards a favorable destination among foreign investors. Moreover, in the latest policy review, the central bank kept SELIC policy rate unchanged at 6.5% in order to reduce the risk of inflation and overshooting of targets.2

o Concession plan by the Temer government for 30 infrastructure projects and privatization of Electrobas, an electric utility company, may favor investments. 1

o Open policies related to developing Brazil’s pre-salt oil reserves may attract investments in downstream and upstream operations. International oil players participated in the auction of blocks in October 2017 and more auctions are expected to be held in the coming year.¹ China’s outbound M&A may increase as Asian countries look to expand their presence in Latin America. This was also evident from China’s investment in the Brazilian oil and gas market in 2017.8

• Political uncertainty prevails in Brazil due to which, industrial production fell by 0.1% on a seasonally adjusted, month-on-month basis in March 2018. Investor confidence may be dampened due to political reforms the current President wishes to introduce before his tenure is over.1

• Without fundamental political reforms by the next government, profitability may be affected by protectionism, burdensome tax regime, and infrastructure barriers.9

2018 includes data from January 1st , 2017 to May 31st , 2018

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The GDP growth rate is expected to rise by 2.2% in 2018. Annual Consumer Inflation eased to 5% in March 2018 (lowest rate since February 2017)3.

Despite economic uncertainties and expected change in trade policies due to the recent July election result, Mexico’s economy shows no perceived signs of undesirability3.

10

M&A deals in Mexico 2014-181

M&A deals in Mexico by investor country and target industry (2014-18)1



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* United States**United Kingdom

Click for contents page

Mexico

• According to the Economist Intelligence Unit (EIU) forecast, the GDP growth rate is expected to rise by 2.2% because of the better than expected results in last quarter backed by strong economic growth.3

• Export-oriented manufacturing is vulnerable to possible protectionist measures from the US, but its longer-term prospects remain good, given the low wages, a relatively skilled workforce, and deep integration into the US value chains. Even if NAFTA collapsed, Mexico will retain these benefits. 3

• The energy sector is expected to continue to undergo a profound transformation; a potential opportunity for private firms. Lower electricity prices and greater inter connection with the North American energy grid will help to reduce input costs for businesses. 3

• The Mexican state of Oaxaca may receive nearly USD1 billion in investments in renewable energy projects . Mexico plans to increase its clean energy source mix to 35% by 2024 and 50% by 2050 from nearly 20% in 2017.10

• Mexico became the first member to ratify the CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership) with an aim to increase its export to the CPTPP members.11

• The peso has weakened since early-April 2018, and volatility may persist owing to uncertainty related to Andrés Manuel López Obrador (AMLO) victory in Mexico’s general elections in July and prolonged NAFTA talks. 3

• Energy sector liberalization and outside private investment may be impacted by the new elected government’s view and decisions, such as slowing new project offerings. Contracts awarded under the recent oil and gas block auctions will be subject to review by the new government, nevertheless this process will be made to determine that the contracts are legal and transparent. 3

• Private investments may be vulnerable by the climate of uncertainty associated with the upcoming AMLO presidency and his approach to Mexico’s reforms currently under implementation.3

• Economic growth could be adversely impacted by weak public investment, dependence on imports, high poverty levels (46.25% of the population in 2014) corruption, poor education outcomes, low levels of banking penetration, and high levels of informal employment. 3


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Chile’s GDP growth, which is expected to be 3.7% in 2018, may favor foreign investments. Inward direct investment in the first quarter of 2018 (USD6.8 billion) exceeded the amount received in full year 2017 (USD6.4 billion).4,17,18

Chile may see positive investor sentiments and a boost in its M&A activity because of the recovering economic fundamentals

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M&A deals in Chile 2014-181

M&A deals in Chile by investor country and target industry (2014-18)1



070140210280350420

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*United States

11Click for contents page

Chile

• Economic activity in Chile is expected to grow, backed by a firm demand from China, and improved business confidence under a Chile Vamos (CV) government The EIU forecasts a real GDP growth rate of 3.7% in 2018, which is higher than that in 2017 (1.6%).4

o Strong performance in the mining sector – Chile is the largest producer of copper in the world and the sector plays an important role in Chile’s economy. Rising copper prices and growing demand from China in 2018 may continue to push exports and boost investments.12

o Increased business confidence – With Sebastian Piñera’s victory in the recent elections (2017), investors believe that Piñera may likely simplify corporate taxes, relax labor reforms, and ease the regulations around environmental approvals for new investments. Piñera has also acknowledged around USD 30 billion of public spending in the next eight years with an aim to increase private investments.13

o Increased private consumption – Retail sales have been increasing in 2018, in the wake of the economic recovery. Private consumption growth is expected to be supported by low real interest rates.12

o Increased Foreign Direct Investment - Chile’s deep, open financial system will support high debt and equity investment inflows in the medium term. Foreign exchange reserves are expected to rise to US$51.1bn by end-2022.4

• The Chile’s Congress has been divided following the elections in November 2017, with no coalition holding the majority in the upper or lower house. This may delay policymaking in the event of a gridlock.4

• Chile, an oil importer, suffers from high costs and vulnerability to energy shortages. The Piñera administration may continue the debated use of hydroelectric power in southern Chile. Moreover, the Chilean Peso may remain vulnerable to shifts in global risk sentiment and the ongoing US monetary tightening.4



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Economic activity is gathering pace after two years of sub-par growth. In Q1, the economy grew by 0.4% m-o-m and 2.2% y-o-y, up from 1.8% in Q4 2017. Easing price pressures and lower interest rates may support real wages and boost household spending. The pace of growth is expected to increase as the external sector and domestic demand improve.5,14,16

M&A activities may rise owing to investments in infrastructure, ease of starting a business, tax reforms, and rising oil prices

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M&A deals in Colombia 2014-181

M&A deals in Colombia by investor country and target industry (2014-18)1



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* Colombia** United States***United Kingdom


Colombia

• According to the EIU, Colombia’s GDP is expected to grow by 2.5% in 2018, from 1.8% in 2017. This may be attributed to lower interest rates, recovering commodity prices, increased real wages, and low inflation. Growth is expected to continue in the coming years at an annual average rate of 3.3% from 2018 to 2022.5

• In terms of the ease of starting a business, Colombia leaped ten places to 96 out of 190 economies in the World Bank's 2018 Doing Business report. In Bogota, the capital of Colombia, establishing a new company involves eight procedures and takes an average of 11 days to complete, this is much below the regional average of 31.7 days.14

• Tax reforms and higher oil prices may narrow the non-financial public sector’s (NFPS) deficit to 1.4% of GDP in 2022, down from an estimated 2.2% in 2017.5

• The annual inflation is expected to maintain its current downward trend and reach the mid-point (3%) of the 2-4% target range set by the Banco de la República (the central bank).5

• The next government is expected to deepen ties with Peru, Chile, and Mexico under the Pacific Alliance. The next government is also expected to reinforce ties with countries with which Colombia has free-trade agreements such as Canada, the US, South Korea, and the EU.5

• Private consumption growth may trend upward in 2018-22 with an average of 3% annually due to the easing effect of the VAT rise in 2017, lower interest rates, better access to credit, higher real wages, and an expanding middle class.5

• Heavy construction costs rose 4.9% y-o-y in May, 2018, accelerating from a 4.5% rise in April, 2018.15

• Corruption raises the costs of doing business in Colombia. The World Economic Forum, in its 2017 Doing Business report, cited corruption as the second-biggest hindrance to business in the country, first being paying taxes.16

• Until the completion of Colombia’s ambitious 4G programme, inadequate information and communication infrastructure will likely remain among the top three challenges for businesses.16



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Peru has recently made notable progress in trade liberalization and progressive reduction of tariff barriers. Private investment is expected to rise in mining sector due to growing metal prices. The upward trend in per capita income is likely to continue over the next decade.6,18

Growth in Peru’s agricultural, transport and manufacturing industry may help improve M&A activity

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M&A deals in Peru 2014-181

M&A deals in Peru by investor country and target industry (2014-18)1

*United States



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Peru

• Peru’s GDP grew by 3.9% in March, 2018. Mining, Oil, and Gas grew by 5.2%, Manufacturing grew by 2.3% and commerce grew by 3.2% in Q1 of 2018. Peru’s economy accelerated in March and registered the highest growth since January, 2017.18

• Consumption is expected to accelerate to 3.5% and private investment is expected to show a similar growth (6.0%), in line with the political tranquility.18

• Domestic demand may accelerate to 5.3%. Whereas exports is expected to grow by 2.2% due to copper exports, and fishmeal and fish oil shipments. Further, the GDP may grow by 4.3%.18

• Peru will continue to support regional integration efforts, such as the Pacific Alliance that includes Chile, Colombia, and Mexico. This may strengthen international relations.6

• BMI expects private consumption to drive growth in the coming years. Employment opportunities in the non-extractive industries, such as services, may increase consumer spending. 17

• The Peruvian Government has been facing challenges to increase investments in infrastructure and implement the various plans with issues such as transparency, opposition from the Congress, and lengthy regulations that disrupt public expenditure.6

o Since 2016, nearly 30 domestic, as well as foreign firms, were implicated in a corruption scandal known as Lava Jato. The investigations pose a threat to already planned infrastructure work in 2018-19.20

• The manufacturing sector is also facing constraints due to external competition, fluctuations in global demand, and the lack of skilled labor. Apart from this, poor education quality, infrastructure constraints, weak institutions, and capacity issues are other factors that can hamper investment decisions.6,19



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President Mauricio Macri’s efforts to bring pension, labor, and capital market reforms may strengthen investor confidence. However, the agriculture sector, which forms nearly 11% of GDP, is likely to suffer in 2018 as an outcome of severe droughts.7,24

Rise in government spending, ongoing structural reforms and infrastructure development may boost investments in Argentina

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M&A deals in Argentina 2014-181

M&A deals in Argentina by investor country and target industry (2014-18)1

* United States** Colombia



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Argentina

• According to EIU, Argentina’s GDP is expected to grow by 2.3% in 2018.7

o Public-led infrastructure projects may propose economic growth. Investments in infrastructure are expected to grow consistently, backed by public-private partnership programs.21

o Argentina’s trade policy is expected to be liberalized over the term of the current administration.22

o The ‘road infrastructure’ may improve in the next several years as the government is expected to implement its USD26.5bn infrastructure plan that would be completed by 2022.22

o Industrial production should benefit from the demand for construction materials, such as steel and cement. Furthermore the industrial production is expected to benefit from export demand. Brazil’s rebounding economic activity is expected to support domestic production by growing export demand.23

• In 2017, Argentina saw the most severe drought in 30 years. This is expected to impact the agricultural output of 2018, especially the harvests of soybeans and maize.21

• The peso may continue to depreciate in nominal terms during 2018-22, which might have a negative effect on investor sentiments.7

• Further reductions and the eventual removal of subsidies on water, gas, and electricity may drive up production costs.7

• Ongoing demand for higher wages may add to the already high operating costs; however, disinflation will likely ease pressures on real wages in the short term.7

• The IMF lending agreement is unpopular in Argentina, and its return to the country may create political unrest and complicate policymaking.7



M&A activity across industries


Latin America is hosting the largest number of licensing rounds in its history this year. The mining sector is expected to grow in Chile and Peru as rising copper prices spur production increases and foreign investments. Chile’s GDP is expected to grow at 3.7% y-o-y in 2018, while Peru’s GDP is expected to grow at 3.9%.24,25

Brazil registered the highest M&A activity in the ER&I industry; investments were primarily driven by the metals & mining sectors

16

Chemicals

Oil & Gas 14%

Power 12%

Metals & Mining 26%

8%

% of deals by top E&R sectors1

40.337.1

43.5

61.1

23.4

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Canada23%

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Brazil 37%

Chile

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M&A Deals in ER&I from 2014 -181

ER&I67%FSI

26%

CNSR6%

Others1%

M&A deals by acquirer industry from 2014 -181

Industry Value of transaction (USD billion) Number of transactions

ER&I 132.81 1187FSI 69.85 452

CNSR 2.66 101Others 0.15 31


Value of deals Volume of deals


Energy, Resources and Industrials (ER&I)

Argentina


United States

© 2018. For information, contact Deloitte Touche Tohmatsu Limited. 17

15%

14%

17%

8%

% of deals by top C&IP sectors1

16.7

22.7

17.920.6

4.2

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M&A Deals in CNSR from 2014-181

CNSR57%

FSI31%

ER&I… Others6%

M&A deals by acquirer industry from 2014-181


CNSR 50.9 1037FSI 24.1 560

ER&I 3.9 105Others 3.2 117

Mexico 16%

Chile9%

Brazil 44%

Argentina 7% United States

11%

Chile 6%

Brazil 30%

12%

Professional Services

T&I**

F&B*




Consumer (CNSR)

Brazil has a large population of youth, which is estimated to exceed 211 million in 2018. This demographic is inclined to consume a variety of food and beverages, beyond staples, and the rise in income enables a preference shift to luxury goods. Around 35.6% of consumer expenditure is towards food, beverages, and tobacco.26,27,28

Brazil continues to attract the majority of investments in CNSR, driven by a growing population and rising private consumption


Mexico

Hotels & Lodging


The Latin American countries’ investments in the development of workforce and infrastructure of IT and telecommunications has opened opportunities for M&A in these sectors. Investments in Latin American startups have doubled since 2013. Major investors like Softbank, Didi Chuxing, and The Rise Fund also entered the region in 2017.29,30

SoftwareIT consulting & services

18

14%

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19%

8%

% of deals by top TMT sectors1

27.4

5.82.7

10.2

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M&A Deals in TMT from 2014-181

TMT62%

FSI29%

CNSR6% Others

3%



TMT 33.98 477FSI 11.74 226

CNSR 2.35 47Others 0.04 24

Mexico 11%

7%

Brazil 57%

Argentina 5%

United States 20%

UnitedKingdom

4%

Brazil 37%

4%Internet software &Services




Technology, Media, Telecommunications (TMT)

SpainAdvertising & Marketing

M&A activity in the region’s TMT industry is expected to continue to recover in 2018, after a decline in 2015-16


Colombia


Non residential Banks

Other financials

Brazil (130 deals) and Mexico (67 deals) are driving the M&A activity in FSI industry. Some of the major deals include XL group Ltd and AXA SA deal (USD15 billion), and Validus Holdings Ltd and American International Group deal (USD5.5 billion).1

M&A activity in FSI sector is expected to rise due the economic recovery

19

18%

16%

21%

9%

% of deals by top FSI sectors1

28.030.1

15.9 17.2

25.8

0

50

100

150

200

250

300

350

0

5

10

15

20

25

30

35

2014 2015 2016 2017 2018

Dea

l vo

lum

es

Dea

l va

lue

in U

SD

bill

ion


M&A Deals in FSI from 2014-181

FSI88%

CNSR5%

ER&I4%

Others3%



FSI 110.3 986CNSR 0.7 57ER&I 1.7 48

Others 4.4 35

Mexico 16%

Chile 10%

Brazil 37%

Peru 7%

12%

Chile 9%

Brazil 30%

United States 9%

Insurance



Mexico


Financial Services Industry (FSI)



Hospitals

20

25%

24%

26%

21%

% of deals by top LSHC sectors1

3.9

2.1

0.8

1.4

0.10

20

40

60

80

100

120

0

1

2

3

4

5

2014 2015 2016 2017 2018

Dea

l vo

lum

es

Dea

l va

lue

in U

SD

bill

ion


M&A Deals in LSHC from 2014-181

LSHC61%

FSI29%

CNSR6%

Others4%



LSHC 5.38 200FSI 2.81 96

CNSR 0.01 19Others 0.12 12

Mexico 8%

Colombia 7%

Brazil 63%

Chile 5%

United States 12%

France 3%

Brazil 49%

5% Pharma-ceuticals



Healthcare Equipment & Supplies


Life Sciences Healthcare (LSHC)

Switzerland

Brazil and Mexico are the most attractive destinations for investments in medical devices, given their sizeable population and government efforts to provide access to safe medical devices and reduce bureaucracy. In 2018, the total drug market value in Brazil is expected to reach USD24.6 billion, representing a y-o-y local currency growth of 6.5% in local currency terms.31

LSHC may attract more investments over the coming years due torising demand for medicines and regulatory advancements


Healthcare Providers & Services


Perspectives


Perspectives

22

The Future of the Deal, previously known as The Deloitte M&A Index, explores the latest trends that are likely to disrupt the global M&A market in 2018 and beyond. The report outlines the opportunities and challenges that these themes present to companies in search of growth. It is aimed at decision makers involved at any stage of the M&A lifecycle.

The state of the deal: M&A trends 2018 Deloitte’s annual comprehensive look at M&A activity. The Deloitte M&A trends report looks at M&A activity by surveying more than 1,000 executives at corporations and private equity firms about the current year and their expectations for the next 12 months. The results of our fifth survey point to strong deal activity ahead. Nearly 70 percent of executives at US-headquartered corporations and 76 percent of leaders at domestic-based private equity firms say deal flow may increase in the next 12 months. Further, there is virtually unanimous sentiment that deal size may increase, if not stay the same, compared with deals brokered in 2017.

Seizing sell-side M&A opportunities in BrazilAlthough 2017 M&A deal activity in Brazil may have been slowed, in part, by the country’s unsettled political and economic conditions; in recent months there have been clear signs that M&A activity—including divestitures—is resuming and has the potential to strengthen in 2018.

Market Consolidation Outlook – Investment strategies and merger & acquisition activityDeloitte Brazil presents the results of its survey that tackles its challenging local M&A market. The survey, led by Deloitte Brazil’s Corporate Finance Advisory practice, presents the opinions of top executives from 221 companies operating in several industry segments. Read more about how M&As have become an alternative to organic growth in Brazil, the expectations for the M&A market in the next two years, and experiences and challenges for closing deals in Brazil.

Mexico Mergers and Acquisitions What’s ahead: The potential impact of the new US administrationThis report explores what the uncertainty around NAFTA and new US domestic policies might mean for cross-border investment and M&A. Read more about the potential impact on Mexico’s key sectors, including manufacturing, agriculture, energy, telecommunications, and financial services.

Argentina - A Destination for Investment?New government initiatives aim to make the country healthier and more open to foreign investors. This report looks at how a new influx of foreign investors has helped accelerate Argentina’s deal flow to date and how an even greater wave of interest is likely to develop in the years to come. Read more about how an improved economy could buoy all sectors.

Wall Street Journal (WSJ) CFO Journal: How to Address FCPA Risks in Emerging Market M&A DealsGain additional insights about how to address FCPA risks in this piece based on the article M&A in emerging markets: A fresh look at successor liability associated with the Foreign Corrupt Practices Act.

Human Capital Considerations in Cross-border DealsAcquiring an overseas company may open up new markets and business opportunities. However, foreign companies may also require a number of unique human capital considerations that may impact deal value. Read more about the impact of these key human capital considerations.

Acquisition Due Diligence Bribery & Corruption RiskBuyers that are considering an acquisition usually encounter a competitive and time-sensitive diligence process focused on assessing the target’s performance key risks. Learn more about how a buyer’s failure to adequately consider bribery and corruption risk may lead to the purchase of an overvalued company and serious collateral consequences.


Deloitte produces original and informative articles that leverage the spectrum of our experience and knowledge throughout the global network. Listed below are recent pieces that provide insights for businesses on events and trends in the Americas region.


Leadership contacts


Americas region leadership—M&A Transaction Services

24

Americas region Argentina Brazil Canada

Hernan [email protected]

Jose [email protected]

Marcelo [email protected]

Ronaldo Xavier [email protected]

Mark [email protected]

Chile Colombia Mexico United States

Pedro Castello [email protected]

Javier [email protected]

Guillermo [email protected]

Russell [email protected]



Americas region leadership—Corporate Finance

25

Americas region Argentina Brazil Canada

Will [email protected]

Marcos [email protected]

Reinaldo [email protected]

Robert [email protected]

Chile Mexico United States

Jaime [email protected]

Mauricio [email protected]

Phil Colaco [email protected]



Sources and presentation notes


Sources

27

1. Thomson Reuters. (2018). M&A Overview. http://mergers.thomsonib.com/NASApp/DealSearch/MAOverview.htm?ExpressCode=DELOITTEDEALS. Retrieved on June 8th , 2018 from Thomson ONE database.

2. The Economist Intelligence Unit Limited. (2018). Brazil country report. Retrieved on June 5th , 2018 from Economist Intelligence Unit database.3. The Economist Intelligence Unit Limited. (2018). Mexico country report. Retrieved on June 5th , 2018 from Economist Intelligence Unit database.4. The Economist Intelligence Unit Limited. (2018). Chile country report. Retrieved on June 5th , 2018 from Economist Intelligence Unit database.5. The Economist Intelligence Unit Limited. (2017). Colombia country report. Retrieved on June 5th , 2018 , from Economist Intelligence Unit database.6. The Economist Intelligence Unit Limited. (2017). Peru country report. Retrieved on June 5th , 2018 , from Economist Intelligence Unit database.7. The Economist Intelligence Unit Limited. (2017). Argentina country report. Retrieved on June 5th , 2018 , from Economist Intelligence Unit database.8. BMI Research - Corporate Financing Analysis - Brazilian M&A To Remain Muted. Accessed on June 13th, 2018.9. EMIS- Brazil Risk Line report. Accessed on June 13th, 2018.10. http://www.latinfinance.com/web-articles/2018/3/mexicos-oaxaca-state-sees-up-to-1bn-in-potential-renewables-investments-this-year. Accessed on June

13th, 2018.11. BMI-Industry Trend Analysis - CPTPP Will Benefit Generic Drug makers. Accessed on June 13th, 2018.12. BMI Research - Economic Analysis - Growth Rebound To Continue Into 2018. Accessed on June 13th, 2018.13. BMI Research - Economic Analysis - All Signs Point To Robust 2018 Growth. Accessed on June 13th, 2018.14. EMIS-Colombia Country Report. Accessed on June 13th, 201815. EMIS-Colombia - Heavy construction costs rise report. Accessed on June 13th, 201816. EMIS-Colombia - Bankruptcy and Insolvency. Accessed on June 13th, 201817. BMI Research - Economic Analysis - Political Uncertainty To Dampen Growth. Accessed on June 13th, 201818. Peru- LAECO Macroeconomic report May 2018. Accessed on June 13th, 201819. EMIS- Peru Risk line report. Accessed on June 13th, 201820. BNAmericas - Peru infrastructure drive hampered by political instability - http://www.bnamericas.com/news/privatization/peru-infrastructure-drive-

hampered-by-political-instability. Accessed on June 12th, 201821. BMI Research - Economic Analysis - Rebound Set To Broaden. Accessed on June 13th, 201822. EMIS- Argentina Country Report. Accessed on June 13th, 201823. BMI Research Economic Analysis - Market Weakness Softens Real Outlook. Accessed on June 13th, 201824. https://news.cgtn.com/news/3d3d674e79516a4e77457a6333566d54/share.html. Accessed on June 13th, 201825. BMI Research Report- Economic Analysis - Growth Recovery Remains On Track. Accessed on June 13th, 201826. BMI Research - Latin America Food & Non-Alcoholic Drinks: Economic And Political Risks Elevated In Election Year. Accessed on June 13th, 201827. http://markets.businessinsider.com/news/interestrates/brazil-retail-sales-rise-more-than-expected-in-january-1018662931. Accessed on June 13th, 201828. BMI Research - Economic Analysis - Economy Past The Worst, Modest Growth Ahead. Accessed on June 13th, 201829. https://www.entrepreneur.com/article/309194. Accessed on June 13th, 201830. http://www.xinhuanet.com/english/2018-06/13/c_137249744.htm. Accessed on June 13th, 201831. Industry Forecast - Pharmaceutical Market - Brazil - Q2 2018. Accessed on June 13th, 201832. The Economist Intelligence Unit Limited. (2018). Market indicators and forecasts.

http://data.eiu.com/EIUTableView.aspx?initial=true&pubtype_id=1303181315 Retrieved on June 5th , 2018 from Economist Intelligence Unit database.



Presentation notes

28

For purposes of this presentation:

• Latin America includes Mexico and countries in Central America and South America.

• The Latin American target companies have been classified based on the dominant geography of the target company in Latin America.

• The region and country of the acquirer have been determined from the location of the ultimate parent.

• “Cross-border inbound M&A” refers to M&A deals where the acquirer is from non-Latin American countries and the dominant geography of the target company is Latin America.

• Completed and pending deals have been considered in the data presented. Abandoned deals have not been considered.


21Sectors

6 Industries Consumer Financial

Services

Banking & Capital Markets

Insurance

Life Sciences & Health Care

Life Sciences

Health Care

Energy, Resources & Industrials

Technology, Media & Telecom

Telecom, Media & Entertainment

Government & Public Services

Health & Social Care

Power & Utilities

International Donor

Organizations

Transportation, Hospitality &

Services

Consumer Products

Retail, Wholesale & Distribution

Mining & Metals

Oil, Gas & Chemicals

Transport

Industrial Products &

Construction

Technology

Investment Management

Real Estate

Defense, Security & Justice

Civil GovernmentAutomotive

Health & Social Care as a separate sector with operational integration with Private Health CareTransport as separate sector with operational integration with Private Transportation subsector in THS

Notes:

New industry alignment

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