Daily News: April 15, 2013

S&P Expects Merger Activity to Pick Up in the Americas

The pace of M&A activity in the Americas is expected to pick up this year, according to two reports published by Standard & Poor’s.

S&P said it believes that a revival in transaction levels and volumes is dependent on continued positive momentum in the U.S. economy and the euro-zone economic and banking difficulties not deteriorating materially.

“If this positive scenario for M&A were to play out, U.S. industries in which we would expect to see an elevated level of M&A in 2013 include technology, telecom, energy, and health care,” said David Wood, managing director in the Corporate Ratings Group of Standard & Poor’s. “Growth in gaming activity across states should lead to increased M&A in that sector as well. In Canada, we expect the mining industry to be very active this year, as it was in 2012.”

In addition, S&P said that as global economic conditions gradually improve, leading Latin American companies are expected to use the ample liquidity on their balance sheets to take advantage of low valuations of distressed competitors in the region and abroad.

“Given currently low interest rates, expectations for economic growth, and some attractive valuations of target companies, Latin American companies may turn more aggressive in their expansion strategies, said Eduardo Uribe-Caraza, managing director and author of the report. “If they pursue large, debt-funded acquisitions, this could bring a deterioration in their liquidity and overall financial risk profile, leading to possible downgrades.”

Outbound activity by Latin American companies purchasing operations abroad, has also been significant, as some of the large regional players, attracted by low equity valuations and business diversification, have sought expansion primarily in the U.S. and Europe, S&P said.

To read the reports, “Economic Growth and Opportunities in Several Markets Will Fuel M&A Activity in Latin America” and “North American M&A Outlook Sector-by-Sector” click here.