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S&P Expects Merger Activity To Pick Up In The Americas This Year - A Look At The Sectors

NEW YORK, April 12, 2013 /PRNewswire/ -- The pace of M&A activity in the Americas is expected to pick up this year, according to two reports published today by Standard & Poor's.    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" can be found at ratings.standardandpoors.com/corporates/mergers-and-acquisitions.html.

Latin America

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, according to  "Economic Growth And Opportunities In Several Markets Will Fuel M&A Activity in Latin America."  The report says that the M&A volume remains intense in Brazil, Mexico, and Colombia, even if at lower levels than the historically high levels of 2010 and 2011. 

M&A transactions over the past three years have been primarily made through cash in hand or stock, the report says, and there generally has not been an impact on credit quality, although that may not necessarily continue.

"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, says 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.   

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