Deals and mergers flawless strategies.

Author:De Haro, Jose Luis
Position:Editor's Choice: THE BEST OF LATIN AMERICA: DEALS OF THE YEAR
 
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Last year was a tricky one for M&A activity in the region after the slowdown of 2013. The glass could be half empty or half full, depending on whom you ask. In absolute terms, total transaction value reached over $105 billion, a sharp increase on the figure for 2013, when mergers and acquisitions in Latin America topped $62 billion. In particular, Brazil's market for mergers and acquisitions expanded the most in four years in 2014, as telecommunications companies sought scale through combinations, and others took advantage of cheap asset prices. According to Bloomberg, deal making in the country rose 16 percent to $84.2 billion. This trend seems not to be losing any steam. One sign of hope is in the number of Brazilian companies looking to do outbound transactions, either selling or restructuring overseas assets, or seeking to acquire new ones. In most regional markets, deal pipelines are filling, suggesting that the pattern of steady recovery will continue. But, what were the biggest deals in the region?

BANCO SANTANDER

Banco Santander Brasil

One of the biggest transactions in Brazil was Santander's controversial $5.5 billion offer to buy back a 25 percent stake in its Brazilian subsidiary listed on the stock market since an IPO in 2009. Since going public, the shares underperformed, so when Banco Santander proposed buying them back at below the IPO listing price, it didn't go over too well with some investors. According to Timothy Puls, equity analyst from Morningstar, "Santander Brasil now has the financial backing and leadership support of a global network in Grupo Santander. This gives it a leg-up in expanding beyond Brazil's borders into other Latin American regions." Banco Santander CEO Javier Marin said at the time to the Wall Street Journal that the bank's strategy to have its subsidiaries publicly traded had not changed at all. However, in Brazil, the market did not believe in Santander's franchise, but the Spanish banking group did; that is why they carried out the transaction. Santander's Brazilian ROA has averaged 1.6 percent from 2009 to 2012, right in line with peers Itau and Bradesco. It is also important to keep in mind that the acquisition was about a long-term goal of becoming a major player in Brazil's banking industry rather than short-term profitability.

MMG SOUTH AMERICA MANAGEMENT COMPANY

Xstrata Las Bambas S.A

"If you're silly enough, or you're not astute enough to realize the value you're giving away, Ivan...

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