3 minute read 7 Apr 2021
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Colombians focus M&A on business resilience and digital strategy

By Andrés Gavenda

EY Latin America North Region Deputy, Strategy and Transactions

Enjoys travel and motorcycles. Proud father of a daughter and a son. Leads transaction advisory service engagements ranging from US$2m to more than US$3b.

3 minute read 7 Apr 2021

For executives in Colombia, the pandemic put a spotlight on the need to accelerate investment in digital transformation.

In brief
  • Many Colombian executives are optimistic that revenues and profits can rebound by 2022.
  • Corporate strategy is focused on digital transformation and managing the effects of the pandemic.
  • Those Colombian executives with M&A intentions are primarily looking for assets in Latin America.

In 2020, Colombian businesses experienced declines in revenue and profitability as the COVID-19 pandemic brought on a 6.8% decline in GDP that reversed strong investment and consumption in 2019.

However, Colombian executives expect these setbacks to be temporary, according to the latest EY Global Capital Confidence Barometer (pdf). Half (50%) of respondents anticipate revenues to return to pre-pandemic levels by 2022 or sooner, and 48% expect profitability to return within the same time frame. These same leaders overwhelmingly expect new entrants to influence their ecosystem, and that a successful ecosystem-driven transformation will require some divestment of non-performing assets.

The pandemic and digital transformation drive strategic considerations

The pandemic’s economic shock spurred 83% of executives to conduct a comprehensive strategy and portfolio review in 2020. It also put technology at the forefront of Colombian corporate leaders’ thinking, with 77% responding that their strategic focus and investment are on digital transformation. Another 62% said their increased focus is on a flexible cost base; and 58%, on innovation of new products and services. To create new ecosystem solutions, 88% are open to partnering with the competition. Overall, 82% say their company is currently undergoing a significant business and technology transformation program mostly due to the impact of COVID-19 and to reduce cost and improve operating efficiency.

M&A strategy focuses on technology and innovation

Given the negative impact the pandemic has had on the Colombian economy across all industries, it is of little surprise that interest in M&A declined since our previous survey. Of the 35% of executives in Colombia (versus 49% globally) who say they plan to actively pursue M&A in the next 12 months, more than half will be looking for bolt-on acquisitions. Strategic drivers include acquiring technology, talent and innovation, and consolidating market share. 

Among Colombian executives focused on deals, half say they will be looking for targets in Colombia, and half, cross-border, with top destinations in the region including Argentina, Brazil and Peru. Half of companies in the automotive, health care, natural resources and oil-and-gas sectors intend to actively pursue acquisitions in the next year, and 75% of those in the consumer sector expect to be active.

Colombian companies seek to build resilience in response to ongoing uncertainty

Although Colombian executives appear relatively optimistic about a rebound within the next two years, general elections in 2022, a mounting fiscal deficit and the possibility of tax reform could prove disruptive for businesses and the economy.

Through disciplined portfolio reviews, and by focusing investments on digital transformation and technology, Colombian companies can build resilience and agility to resume their growth trajectory despite uncertainty ahead.

Summary

The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

About this article

By Andrés Gavenda

EY Latin America North Region Deputy, Strategy and Transactions

Enjoys travel and motorcycles. Proud father of a daughter and a son. Leads transaction advisory service engagements ranging from US$2m to more than US$3b.