COLOMBIA Law and Practice Contributed by: Jaime Trujillo, Andres Crump and Natalia Ponce de León, Baker McKenzie
1. Trends 1.1 M&A Market
1.2 Key Trends Trends by Geographical Footprint
In recent years, there has been a noticeable shift in M&A transactions towards targets with regional, multi-jurisdictional operations. Inves - tors are looking for companies that offer regional scale and have a presence beyond Colombia. This trend is particularly evident in sectors such as energy, telecommunications, and healthcare, where companies have successfully expanded their operations into the Andean Region and Central America. Colombian companies with a proven track record of regional expansion are particularly appealing to investors. These companies pro - vide an opportunity to gain a foothold in mul - tiple markets and leverage regional synergies. The focus on regional scale reflects a broader strategic shift among investors seeking to diver - sify their portfolios and mitigate country-specific risks by investing in companies with a broader geographic reach. Trends by Investor Type Strategic investors have been at the forefront of (an albeit diminished) M&A activity in Colombia and the broader Latin American region. These investors are typically more resilient to short- term market fluctuations and economic insta - bility because they have a long-term investment horizon. Unlike financial investors, who may be more sensitive to short-term economic changes and volatility, strategic investors are focused on the bigger picture and their long-term strategic goals. They also have access to cheaper financ - ing, as many have substantial cash reserves and can secure financing at preferential rates, mak - ing it easier for them to pursue and close deals even in challenging economic conditions.
The Colombian M&A sector continues to face a challenging economic and political environ - ment. Although aggregate deal value showed a nominal 35% increase during 2024, this was attributable to a handful of large one-off deals and comes in the wake of dramatic declines in 2022 and 2023. The country has been hurt by major global factors such as high interest rates, geopo - litical events disrupting supply chains and the increased empowerment of regulatory authori - ties in countries where deals originate, as well as local factors such as the slow pace of economic recovery in Brazil (usually the region’s jugger - naut), the adoption of populist policies, recent changes in government and the upcoming elec - tions. At local level, deal activity has been affected by the increase in the country’s risk profile, higher taxation rates, the current administration’s gen - eral hostility towards the private sector and its mixed signals in critical sectors such as energy, utilities and healthcare – all of which have intro - duced a layer of unpredictability to the business environment. That said, the country’s system of checks and balances has proven robust. The current admin - istration is set to end in 2026, and its more extreme proposals have either failed or been watered down. This, together with structural attributes such as Colombia’s geographical loca - tion, demographics and the quality of its human resources, have made investors optimistic on the country’s medium- and long-term prospects.
483 CHAMBERS.COM
Powered by FlippingBook