News report
Latin American target companies must ensure transparency in M & A deals to boost their valuation
A lack of transparency in M & A transactions can lead to potential reputational damage in addition to negatively affecting deal values
Target companies in Latin American M & A deals will boost their valuations if they ensure there is maximum transparency in deal negotiations and highlight the steps they have taken to ensure compliance , attendees at an event organised by The Latin American Lawyer in Buenos Aires , Argentina were told .
The growing need for transparency in M & A due diligence was one of the key issues highlighted by participants in the event , which was hosted by law firm Estudio Beccar Varela in cooperation with law firms Basham Ringe & Correa and Batalla Salto Luna . Speakers said that about 20 per cent of M & A deals do not include a transparency analysis as part of
Sellers need to do the same level of due diligence as acquirers on deals , attendees heard due diligence , which increases the risk of finding compliance issues and corruption .
Targets must prepare While it is normally the responsibility of the buyer to conduct due diligence and transparency reviews , it is increasingly in the interests of a target company to prepare for a potential acquisition by solving any possible issues in order to be better positioned to welcome suitors , event participants were told .
In countries such as Mexico , the Foreign Corrupt Practices Act and anticorruption compliance are relatively new considerations in the context of transparent M & A due diligence , attendees heard . Clients need to understand their responsibilities in relation to efforts to increase transparency and how they impact on company valuations , particularly when
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International investors ´ betting heavily ’ on Latin America
Despite US President Trump vowing to change trade agreements with countries in the region , reversing such deals will be difficult in the short-term
Despite growing political uncertainty in key markets such as the US and the UK , companies are making strong bets on Latin America and there are high hopes that M & A activity in the region could pick-up in the final quarter of this year .
José Antonio Morán , chair of North America banking , finance and major projects at Baker McKenzie , highlights Siemens ´ projected expansion in Argentina , Repsol increasing its upstream investment in the region , as well as the recent spike in IPOs and sovereign bond issuances , as grounds for optimism .
That said , Morán says the fact the US is preparing to review double taxation treaties with a number of countries creates uncertainty . However , he adds that Latin America is in need of infrastructure investment , so opportunities are still plentiful , especially in Colombia and Paraguay . “ Renewable energy projects are attracting attention in Argentina and elsewhere ,” he adds .
Despite newly-elected US President Donald Trump having set out plans to change the country ’ s trade agreements with countries such as Mexico , Morán argues it will be difficult to make alterations to such deals in the short-term . “ The platform of the US president includes references to the elimination of trade deals such as NAFTA , taking action against corporations that export jobs to Mexico rather than employ Americans in the US , and measures to control immigration ,” he says . “ However , NAFTA has been in existence for over 20 years and has changed the way business is conducted in North America – it is not possible to reverse that in the short-term .”
Morán also highlights the fact that Mexico is the third-largest trading partner of the US , as well as being the US ’ second-largest export market . “ Such economic realities should weigh heavily when considering any changes in trading relationships ,” Morán says . He adds that , given the sizeable investments made by US and Canadian companies in Mexico , he does not expect the flow of foreign funding into the country to stop .
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• THE LATIN AMERICAN LAWYER • Volumen III 2017 www . iberianlawyer . com / latin-america