A wave of mergers and acquisitions is set to sweep corporate Latin America, as the region's stagnant economy, political instability and lack of cash flow all encourage multinationals invested in the region to find ways to acquire liquidity.

A year of transition has arrived in Latin America, according to major heads of Latin American branches of multinational investment banks and other major corporations.

Crunch Time

Moving into 2016, economic pressure is hitting commodity prices, interest rates and the availability of cash and credit in major parts of the region's economy, most notably Brazil. An overall economic contraction is expected to more than double last year's slowdown in many important sectors of Latin America.

The result, according to analysis from Bloomberg Business, is a slew of major debt restructuring initiatives and possible mergers, as companies look to find new sources of cash in a credit squeeze.

Selling assets to meet debt payments looks to be the norm for multinationals that have invested in the region and are now looking for the least costly ways to get out.

"Assets that we never thought would be coming to the market are now for sale as some companies and sectors are distressed and multinationals are announcing huge divestment plans," said Marcus Silberman, co-head of Latin American mergers and acquisitions for Bank of America Merrill Lynch to Bloomberg this week.

"Most of the transactions out there [in Latin America] require credit and, whether you are an investor or a banker, you either figure out how to do that or you don't have a deal," added Jim Allen, head of Latin America M&A for Morgan Stanley.

M&A Wave Coming

Total volume in Latin America and the Caribbean region for mergers and acquisitions has increased 14 percent compared to the same time last year. The number has climbed to $26 billion in the first quarter of 2016 alone, according to data from Bloomberg.

Head of Latin American M&A advisory at JPMorgan Chase & Co. Ignacio Benito said he expects more to come this year.

"We expect M&A level to somewhat increase this year in Latin America as companies are getting used to the new price levels that seem to be there to stay," he said to Bloomberg.

The economic downturn in Latin America is encouraging both divestment and investment, as the devaluation of local currencies seems to have locked some investments -- like those of many private equity firms -- into a longer time frame.

As Latin Post previously reported, the decreasing value of Latin American currencies against the U.S. dollar since 2014, along with the fall of oil and commodities prices, has a lot of foreign investors looking for an exit, while others are staying put for now since divesting would be costly.

For corporations in the region, buying up control of distressed companies has become a similar gamble.

"When you have volatility, it's generally more difficult to get buyers and sellers to agree on price," said Benito.

The volatility, both economic and political, in the region isn't stopping a general sense of optimism for the future of business in Latin America, though, as Morgan Stanley's point man for the region noted.

"It's the perfect storm for Latin America," said Allen. "But Latin Americans are adept at charting a course through stormy waters."

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