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Dealmakers are bullish

Global Capital Confidence Barometer | Peru highlights | 16th edition

Peruvians take advantage of positive economic outlook to pursue all avenues for future growth

Pro-business policies and infrastructure investments are boosting Peruvian executives’ dealmaking confidence, according to the latest edition of the EY Capital Confidence Barometer. Sixty percent of executives expect to actively pursue M&A in the next 12 months — the highest percentage recorded in Peru to date, and up 14 percentage points from six months ago.

Deal pipelines are healthy

With so many Peruvian sectors still ripe for consolidation, dealmakers are bullish on the number and quality of acquisition opportunities. The majority of Peruvian dealmakers (92%) are targeting deals under $250m. Pipelines are relatively healthy, and executives are cautiously optimistic about deal completions.

As Peru’s government makes progress in completing infrastructure projects, we expect pipelines to grow and deal completion numbers to improve. That said, Peruvian companies are willing to wait for the right deals and will walk away, particularly if economic or political conditions are not favorable.

In late March, during the survey period, Peru experienced an extreme weather event from El Niño Southern Oscillation (ENSO) that led to major coastal damage. Although it’s too early to tell the medium- to long-term economic impact of ENSO, our Peruvian Barometer respondents remain overwhelmingly upbeat about the local economy: 95% see it as stable to improving, thanks to strong macroeconomic fundamentals, and almost half see improvement in credit availability and equity valuations.

Strong domestic outlook present

While 31% of executives see high volatility in currencies and commodities as a key risk to their core business, the Peruvian sol continues to exhibit lower exchange-rate volatility versus the US dollar, especially compared with other Americas currencies.

Given this strong domestic outlook, Peruvian executives are looking to take advantage of organic growth opportunities — indeed, more than two-thirds are focused on organic growth, a higher percentage than global Barometer respondents (68% versus 56%). However, with a majority also focused on dealmaking, it’s clear that Peruvian companies are looking at all avenues to support future growth.

Peruvian executives are also more focused on future-proofing their business than their global counterparts (57% versus 35%). In an age of constant disruption, Peruvian companies are particularly concerned about digital transformation: 34% cite implementing digital innovation as their most pressing challenge, and 25% cite digital disruption as the top boardroom issue, versus 14% citing shareholder activists.

Growing concerns over future-proofing businesses

These disruptive forces, combined with potential changes in global trade, have a full 90% of Peruvian companies increasing the frequency of their portfolio review process. Similarly, 59% say they are actively reorganizing their geographical footprint to more quickly respond to major changes in trade policy.

Looking ahead, as Peru’s administration continues to implement pro-business policies, we expect companies to pursue cross-border deals that provide access to new markets — even as they keep a close eye on a range of disruptive forces, from innovators to activists.
EY - Enrique Oliveros

Enrique Oliveros

Lead Partner

Transactions & Corporate Finance

Ernst & Young Asesores S. Civil de R.L.

Download Peru highlights (PDF)