Over the past four quarters, there has been significant growth in M&A activity in the middle market of Latin America and the Caribbean. Both the number of M&A deals, aggregate value, and average value of M&A transactions in these regions have increased substantially.

The number of deals have increased in each quarter, from 45 in Q3 of 2011, to 83 in Q4 of 2011, to 107 in Q1 of 2012, and finally to 135 in Q2 of 2012.

Additionally, the aggregate value of these transactions increased substantially, from US$2,203MM in Q3 of 2011 to US$11,043MM in Q2 of 2012.

In terms of the average value per transaction, the first three quarters mentioned had fairly consistent figures (US$48.9MM, US$41.9MM, and US$43.6MM). However, Q2 of 2012 saw an 87% increase in the average value per transaction, jumping to US$81.8MM. A portion of this spike can be attributed to the M&A activity in energy and consumer staples, which experienced exponential increases.

As a result of these drastic increases in M&A activity, Brazilian middle market M&A now represents 31% of all middle market M&A deals in Latin America and the Caribbean. There are a number of reasons for this, including currency factors, changes in antitrust laws, growth in infrastructure projects in Brazil related to the impending Olympic Games and World Cup events, etc.

Over the past three years, the emergence of the South American economy has not been a surprise to many. While Brazil may be the first country that comes to mind when one mentions a strong South American economy, other countries such as Argentina, Uruguay, and Colombia will start to make more headlines over the next two to three years. After all, their respective GDP growth rates on a year-over-year basis are the three highest in South America at 9.30%, 8.47%, and 7.7%.

From an M&A standpoint, in these countries combined, there were 42 more deals announced or closed in 2011 than there were in 2010. The associated transaction values jumped by $3.6 billion. In terms of the increase in number of transactions and the aggregate increase in transaction value, both increased by 22% from 2010 to 2011. Furthermore, almost 60% of all deals occurred in one of the four following sectors: Energy, Financials, Materials, and Industrials.

With strong macroeconomic factors, we expect M&A in these and other South American countries to continue the upward trend in 2012. Additionally, as more and more companies worldwide begin to see the tremendous growth opportunities that these countries present, the number of transactions should continue to increase every year.