2 minute read 19 Nov 2018
Helicopter pilot looking down over mountainous terrain

M&A rebounds as a pro-business government reignites confidence in Colombia

By

Andrés Gavenda

EY Latin America North Region Deputy, Transaction Advisory Services

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.

2 minute read 19 Nov 2018

With elections behind them and growth expected ahead, Colombian companies plan for increased M&A.

This article is part of our M&A report Global Capital Confidence Barometer, 2nd half 2018.

At the time of our last Capital Confidence Barometer, Colombia was in the middle of elections. It was a time of uncertainty as two candidates from opposite ends of the political spectrum squared off. M&A intentions fell to 33% from 68% six months previous, even as respondents expressed optimism in macroeconomic indicators.

The current CCB results are in and with President Iván Duque now leading a pro-business majority government, Colombian corporate confidence has rebounded, as 51% of executives indicate they expect to pursue acquisitions in the next 12 months. Similarly, expectations around pipeline and completions have seen significant improvements, with 54% expecting increases in both, vs. 11% six months ago.

M&A expectations

51%

of executives indicate they expect to pursue acquisitions in the next 12 months.

Yet, even as confidence returns, Colombian executives are keeping a close eye on the new government’s policy intentions. Proposed tax reforms, even if they may be good for business, and other policy initiatives have 38% indicating that regulatory and policy uncertainty pose the greatest near-term risks to their growth objective; 51% see this uncertainty as the biggest risk to dealmaking.

These policy uncertainties, as well as increasing trade tensions globally, have Colombian executives re-examining strategic and financial criteria more frequently; 57% indicate they review portfolios annually, and 58% are stress-testing their strategies annually or more frequently to prepare for multiple scenarios. More than three-quarters (76%) have identified assets ripe for divestment through regular portfolio reviews.

Policy uncertainties notwithstanding, Colombian executives are feeling bullish about the domestic M&A market, with 89% expecting it to improve over the next 12 months.

M&A outlook

89%

expect domestic M&A to improve over the next 12 months.

With record dry powder, 44% say they expect private equity to emerge as a dominant player in the M&A market. At the same time, 31% expect cross-sector M&A to take center stage as Colombian corporates look for technology and digital assets to remain agile in the face of unending disruption.

With growth expected and elections behind them, Colombian companies are looking to get off the sidelines and back into the M&A market.

Summary

Colombian executives are more confident about M&A now that elections have resulted in pro-business government. 51% expect to pursue dealmaking, and 54% expect improvement in pipeline and completions (up from 11% half a year ago). Despite some uncertainties, 89% expect the domestic M&A outlook to improve. Download the full report (pdf).

About this article

By

Andrés Gavenda

EY Latin America North Region Deputy, Transaction Advisory Services

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.