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Latin American families bullish on M&A opportunities, keen on family offices

By Nicholas Moody

Latin American ultra-high net worth (UHNW) business executives are on the lookout for merger and acquisition (M&A) targets and are particularly bullish about regional opportunities, despite the challenging economic environment, new research suggests.

Risk & Return in Latin America found that 56% of the 45 UHNW family business executives surveyed perceive M&A opportunities in Latin America to be excellent or very good.

Close to half (43%) were extremely or very likely to pursue opportunities in the next 12 months, according to the study by Campden Wealth Research, in partnership with Morgan Stanley.

Chilean retailer Falabella is a good example of this trend. In 2014 Falabella bought Peruvian home improvement chain, Maestro, for $490 million. In January 2015, it announced plans to expand its footprint in Argentina, Brazil, Chile, Colombia, Peru, and Uruguay with a $4.4 billion investment.

John Moore, head of Latin America for Morgan Stanley, said that the research showed successful family business owners see themselves as uniquely positioned versus international competitors to grow within the region. 

“They wish to do so via mergers and acquisitions, and also are seeking advice on opportunities in private equity, venture capital, and joint ventures,” he said.

Latin American business leaders are looking to expand despite a muted economic outlook for the region and the perception of significant risks. Brazil's recession is projected to continue in 2016 according to the OECD, while the IMF forecasts that Argentina's economic output is set to decline 1% this year.

Risks perceived as extremely or very important include personal/business reputation (93%), political/country risk (89%), capital risk (84%), inflation rate risk (81%), and family succession (81%).

“Our survey found that heads of family businesses are actively seeking to improve their ability to manage the risks they can control,” said Dominic Samuelson, chief executive at Campden Wealth.

The study also found a significant interest in family offices in Latin America. More than half of the participants (53%) use a family office structure, while 56% of those who are intending to change the management of their wealth are looking to establish a family office. 

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