Investors are looking at Latin America for mergers and acquisitions (M&A) and other opportunities.
This is likely to increase the amount of M&A in the region in 2023, but the number of initial public offerings (IPOs) is still likely to be held back by other factors, Reuters reported Tuesday (Dec. 27).
Both kinds of deals became much less frequent this year, according to the report.
M&A activity in Latin America dropped by one-third this year after a record 2021, but bankers expect it to grow by as much as 20% next year, the report said.
The report attributed this anticipated growth to investors looking at the region after moving away from activity in Russia and China — the former due to the war in Ukraine and the latter because of concerns about COVID, tensions with the United States and a lack of transparency among Chinese firms.
For example, the Financial Times reported in June that digital bank Nubank was on the hunt for FinTech bargains in Latin America as venture capital money dried up amid rising interest rates and tighter credit flows.
Nubank CEO David Vélez said at the time that it would make sense for some players in the region’s crowded FinTech market to merge or selling, adding, “This will enable the survival of the fittest.”
But the region’s IPO volume is likely to be slower to recover, according to Reuters. Share offerings fell 61% this year and Brazilian investors, for example, continue to put their money where they can take advantage of the country’s high interest rates, the report said.
That trend isn’t limited to IPO activity in Latin America. As PYMNTS reported Thursday (Dec. 22), the specter of continued rate hikes fuels fears of headwinds for the platforms and the digital-only upstarts that promise to “make over” verticals such as real estate and lending and trade that are rate sensitive.
The rout that tech stocks faced on Thursday captures all the pressures felt by the FinTech IPO names. Economic data fueled fears of continued rate hikes, and the promise of rate hikes by the Federal Reserve well into 2023 seems assured.