4 minute read 9 Jun 2020
An investor reacts as he monitors the share index in a stock market gallery

Peruvian executives maintain M&A appetite as economic confidence wanes

By Enrique Oliveros

Ernst & Young Asesores Empresariales S. Civil de R.L., (Peru) Lead Partner, Transactions & Corporate Finance Services

Experienced investment banker with cross-border and multi-industry proven track record. Big soccer fan and passionate reader.

4 minute read 9 Jun 2020

Even as Peruvian companies expect the pandemic to have severe impact on profitability, their desire for M&A remains strong.

When the EY Global Capital Confidence Barometer (pdf) survey was undertaken — between 5 February and 26 March 2020 — few executives in Peru had a truly accurate view of the impact COVID-19 would have on their people or the economy. Consequently, they were more optimistic than global executives. Peru’s economy has thrived for much of the past 20 years, so they had every reason to be optimistic.

We see this optimism in Peruvian executives surveyed between 5 and 19 February, where 55% had a positive view of the local economy. However, between 19 February and 26 March, confidence eroded, with only 11% having a positive view of the local economy and 32% taking a more negative view. And yet, among executives surveyed in March, 78% thought the pandemic would have only a minor impact on the local economy, vs. 22% who thought it would have a severe impact.

Notably, even though three quarters of Peruvian executives anticipated the local economy would only be minorly affected, 56% anticipated the pandemic would have a negative impact on their company’s profitability and margins.

Even so, while a majority of Peruvian executives said they were re-evaluating their global supply chain (67%), only 33% said they were taking action to change it. More than three-quarters (78%) said they were re-evaluating speed of automation, but only 11% said they were making changes to improve. This contrasts with global executives, 52% of whom said they were taking action to modify their global supply chain and 36% who were taking steps to fast-track their speed to automation. Given that these are not areas of strength for Peruvian companies, there is room for improvement and change as they build resilience in preparation for recovery.

Peruvian appetite for M&A grows as disruption creates opportunities

Before the depth and breadth of the pandemic became known, Peruvian executives were optimistic about the local M&A market, with 64% of executives surveyed between 5 and 19 February saying they expected the M&A market to improve. After 19 February, confidence among executives increased to 74%.

EY M&A survey intent to actively pursue M&A in next 12 months

Although Peruvians were highly optimistic about the M&A market in the next 12 months, their optimism was more tempered around deal intentions, though it improved significantly in executives surveyed after 19 February (58% vs. 45% before 19 February). Nevertheless, these intentions are higher than six months ago when only 39% expected to pursue M&A.

Some of this optimism may stem from the expectation among 44% of Peruvian executives that valuations will come down as a result of the pandemic’s economic impact. In terms of the assets they plan to pursue, 44% will be looking at bolt-on acquisitions, while 31% are in the market for transformative deals that could reshape their business.

Type of M&A


of Peruvian respondents say acquisitions will be bolt-on to complement current business strategy.

An additional motivation for M&A activity may be the postponement of the pending regulation that will require larger transactions to be evaluated before the merger is approved. The regulation was expected to be enforced by end of 2020 but is now postponed until 1Q21.

Notably, for the first time in several years, Peru won’t be the top investment destination, or even among the top five, as Peruvian companies pursue deals. Instead, they’ll be focusing their efforts globally, giving primary consideration to assets in France, New Zealand, Canada, Brazil and the UK. This may be due to a maturing domestic market and the need to diversify and expand geographically, while the strong local players who have money and access to financing are seeking growth and value-creation opportunities abroad.

Peruvians focus on survival now, and see growth and M&A opportunities in the next and beyond

Although Peruvians are optimistic, some Peruvian companies are better prepared than others to weather the current crisis. Consumer habits are changing as lockdowns continue in the country and around the world. As restrictions ease, they will be lifted in stages, making it hard for small and medium-size businesses to survive, even with the financial aid packages the Peruvian government is offering. For now, Peruvian companies are focused on workforce safety and wellbeing, business continuity and financial viability. Once Peruvian companies have addressed these immediate concerns, they can turn their attention to planning for what comes next and seizing the growth and M&A opportunities that lie beyond.


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 Enrique Oliveros

Ernst & Young Asesores Empresariales S. Civil de R.L., (Peru) Lead Partner, Transactions & Corporate Finance Services

Experienced investment banker with cross-border and multi-industry proven track record. Big soccer fan and passionate reader.