Mazars Americas - Current Status of Mergers and Acquisitions in Colombia

We present you our Mazars Americas newsletter where we will be updating monthly news on various topics of Financial Advisory. This month we give an update on the situation of Mergers and Acquisitions in Colombia.

Economic outlook	Colombia is currently facing different challenges, such as the increase of the CPI (13.2% y-o-y) and the intervention rate of Banco de la República (13.0% y-o-y). Despite the fact that Colombian inflation is one of the highest in LATAM, the Colombian central bank expects that in the second half of 2023, inflation will soften and be controlled to achieve a CPI index of 8.0% by December 31, 2023. Additionally, Colombian president Gustavo Petro is about to present and start discussing with the Congress about renewal energy transition, social security (healthcare), labor and pension reforms which are focused on change the current social and economic frameworks. However, as these reforms are not defined yet, there is an environment of less attracting investment.
M&A activity in Mazars - Colombia (main closed deals)	Mazars in Colombia was the advisory firm of the seller (ad_bid) in this transaction, this demonstrates the methodology and quality of our Financial Advisory line and their experts. Globant, a leading company in digital transformation in the world, acquired ad_bid, a specialized marketing agency (Total transaction value: USD18m). VISEO announces the acquisition of Xertica’ s Salesforce service line for Colombia and Mexico as an expansion strategy in the digital transformation sector. The Mazars Financial Advisory lines in Colombia together with Mazars in Mexico advised the Financial, Tax and Labor Due Diligence service on the transaction process. Mazars in Colombia supported the company valuation of Chilean Actual Group with he aim of estimating and valuating, based on IAS 36, potential assets impairment as of Dec 31, 2022.
Relevant news	The low-cost airline Viva Air suspended its operations in Colombia with "immediate effect" due to the critical financial situation it is going through. The Superintendence of Transportation, the authority in charge of monitoring the sector, required Viva Air to guarantee the rights of users by maintaining communication channels and immediately seeking solutions "that the transport contract demands". Despite Avianca airlines is interested in acquiring Viva Air, the Ministry of Transport and Civil Aeronautic entity concerned about his acquisition and are preparing a decision on the definitive agreement between the two airlines, because apparently, they did not commit some necessary processes in the integration procedures. Despite of maximum financial interest rate regulated by Colombian Central Bank is over 40%, most of the main Colombian Banks decided to reduce their interest rates for credit cards under 25% to incentivize the consumption and stimulate the Colombian economy.
Industry activity	During the first quarter 2023, Colombian M&A activity ranked fourth by deal volume, with 23 deals, down 50% compared to the same period last year. However, by aggregate value, Argentina ranked fourth with USD 179 million, based on 9 deals with disclosed value, representing a decrease of 73% (Transaction register).
Home currency impacts to global pressures (as applicable)	After Silicon Valley Bank (SVB) regulators shut down Silicon Valley Bank on Friday (March 10th, 2023), in the largest U.S. bank failure since the 2008 financial crisis, on Monday (March 13, 2023) Colombian exchange rate was impacted and exposed to a high depreciation. However, given the current OPEC+ cuts in terms of projected oil production and the temporary stability of US inflation, there has been a propensity towards exchange rate stability at the close of March 31, 2023, placing it at levels of COP 4,603 per dollar.

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