M&A investment opportunities in Latin America
Increased labor and logistics costs have made it less attractive for U.S. companies to manufacture consumer goods in China and Southeast Asia –– instead, companies are setting their sights on Latin America (LATAM).
While regions like Brazil and Argentina are facing economic uncertainty, they offer opportunities for both strategic acquirers and long-term private equity investors. For example, decreased valuations coupled with the strong U.S. Dollar could present opportunities to acquire fundamentally strong businesses at favorable terms for the investor.
Other regions in LATAM, such as Mexico, continue to be strong areas for M&A investment. Along with its participation in the North American Free Trade Agreement, Mexico holds trade agreements with 45 countries, making it a favorable investment location for regional operation bases in LATAM. Further, Mexico’s competitive wage rates, proximity to the United States, and flexibility of doing business makes it attractive to U.S. companies seeking near-shore manufacturing.
Finally, with an overall growing middle class in LATAM, consumer product sales are expected to increase as disposable incomes grows. This allows U.S. companies to take advantage of LATAM’s competitive wage rates, close proximity, and an expanding market for consumer goods.
While many organizations and private equity firms have earmarked funds to be invested in LATAM, it’s important to remember the region is an emerging market and is subject to volatility and risk. Investors are encouraged to partner with service providers that have experience investing and doing business in the region. For more information and assistance, contact Plante Moran’s Global Services consulting team.