Exploring International Mergers & Acquisitions: Latin America
November 24, 2021
In this special episode, recorded during 7 Mile Advisors’ 2021’s ACCESS Conference, 7MA Managing Director Horacio Yenaropulos hosts a panel discussion on exploring international M&A trends, focused on Latin America.
Joining Horacio are experienced international investor Mario Masrieh, Principal at Trivest Partners, which recently invested in Argentinian FinTech company Veritran; and Daniel Lopatin, Co-founder and CFO of tech consultancy ArganoUV. Daniel’s company United Virtualities was acquired by Argano in February 2021, in a deal that was facilitated by 7MA.
Latin America has a need and market for new digital solutions. Mario says that this was one reason Trivest invested in Veritran. “When you look at the unbanked and underbanked populations … there’s a huge white space,” he says. “Both the governments and the private sector need to bring the populations into the financial institutions, to create more wealth for the population and to support commerce.”
The panel reviews the complexities and challenges that investors may encounter when moving into LATAM, including the diversity of the region, regulatory tax differences, and how to select strategic markets for your business goals. They also discuss best practices for working with the lawyers and accountants on your team.
Daniel believes that understanding the culture of a country or region can be the difference between the success and failure of an acquisition in LATAM. “At the end of the day, your monetary success is attached to your ability to get together with them, and work together for the foreseeable future,” he says. “You shouldn’t undermine the importance of cultural differences when you come into a deal.”
💡 Featured Guest 💡
Name: Horacio Yenaropulos
What he does: Based in Mendoza, Argentina, Horacio is a Managing Director with 7 Mile Advisors, and leads the Latin America sector coverage team. He has 25 years of financial experience, and previously worked with Globant’s corporate development group, where his responsibilities ranged from due diligence to SPA closing. He’s also held financial leadership positions with several key Latin American companies, including PricewaterhouseCoopers, Hidronor Chile, Viña San Pedro Wine Group, and Belatrix Software.
Organization: 7 Mile Advisors
Words of wisdom: “An M&A transaction process is normally intense and time-consuming for founders and managers.”
💡 Featured Guest 💡
Name: Mario Masrieh
What he does: Mario is a Principal at Trivest Partners – a leading private equity firm focused on partnering with founder and family-owned businesses. He is responsible for analyzing investment opportunities, identifying strategic acquisition targets, and monitoring existing portfolio companies in the firm’s non-control investment strategy. Prior to joining Trivest, he was a private equity Vice President at Gridiron Capital, and also previously worked as an analyst at Morgan Stanley, in the global consumer and retail team.
Words of wisdom: “We don’t re-trade our deals.”
💡 Featured Guest 💡
Name: Daniel Lopatin
What he does: Daniel is the co-founder and CFO of United Virtualities, now ArganoUV, a technology consultancy that merges art and software to solve digital problems for brands. United Virtualities was one of the largest e-commerce suppliers out of Latin America when it was acquired by Argano, a deal that was facilitated by 7MA.
Words of wisdom: “You need to find the right partner that will work alongside you.”
🗝️ Key Points 🗝️
Top takeaways from this episode
★ LATAM needs digital transformation. The reason the LATAM region is so appealing to investors right now is because there is a clear need for digital innovation, particularly in the Financial space. For example, there’s still a need for digital banking apps and web-based banking, as well as e-commerce.
★ There’s not a single “Latin America.” As Daniel points out, LATAM is not a homogenous region: It’s made up of 33 countries, each of which has many different languages. Understanding the history and culture of the place where you’re looking for investment opportunities will give you a much better chance of success.
★ Elevate your evaluation criteria. Given the regulatory challenges and the risks associated with operating across different countries, it’s wise to elevate your standard investment criteria when looking at possible M&As in LATAM, including around customer concentrations, growth rates, and margins.
★ Overcoming talent challenges. Before evaluating your talent, decide where your focus is going to be. Does the company have customers in the U.S.? Or is it targeting other countries within LATAM? This will affect your talent strategy, including when it comes to assessing key skills such as English proficiency.
⚡ Episode Insights ⚡
[6:30] Don’t over complicate your deals: With 33 different regulatory and tax structures in LATAM, it’s easy to create complex deals if you’re not focused on specific countries or regions.
[17:47] Language is important, but not a deal-killer: Daniel explains that while language barriers can be a challenge, they are not an insurmountable problem.
[19:08] Argentina has an undeniable talent pool: Mario notes that despite reservations from investors, Argentina has an impressive and relatively untapped talent pool that foreign businesses are only just starting to recognize.
[24:03] Don’t be swayed by the highest offer: Daniel says that although high offers might seem like the best bet, you need to stay focused and pick the offer that is right for you. That’s what he did, and it worked for him.
[26:12] Exit strategies focus on IPOs: Mario says that in LATAM, the most common strategies are VC investment followed by a strategic exit or an IPO. Unlike in the U.S., he doesn’t see many deals focused on standard private equity.
[32:57] The LATAM digital industry is growing: Daniel sees growth across the digital industry in LATAM, including in e-commerce but also other segments.
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Deal Talk with 7MA, a bi-weekly podcast by 7 Mile Advisors that aims to give listeners a look behind the curtain of the middle-market Mergers & Acquisitions world. 7 Mile Advisors is a middle-market M&A firm based out of Charlotte, NC, that provides investment banking services and advice on mergers, acquisitions, and private capital transactions around the globe.