Doral, Fla. — Latin America represents an "amazing" opportunity for mergers and acquisitions in the plastics packaging markets, according to one man who makes a living making deals.
But well-known packaging M&A adviser Tom Blaige also warns that opportunities in countries across the region are not created equal.
"Latin America is an evolving geography, and so it's a faster-growing region. And so, suppliers are looking to grow, looking to expand into areas where they can grow faster and accelerate their growth, and Latin America is perfectly poised," he said during an interview at the recent Packaging Conference in Doral, near Miami.
"But in the region, you have to be selective as to where you go," he said. "You've got socioeconomic and you've got political risk. You've got economic risk, right? So, some countries have high interest rates and no inflation, and some countries have political issues, and some have complicated tax structures, so you have to know where you're going," he said.
Combining the many different factors that can affect business in Latin America, Blaige believes it is better to buy existing companies in the market that have already figured out how to navigate the challenges instead of trying to create new facilities.
Blaige likened the opportunities in Latin America to those in California, which enjoys a reputation of being more challenging for businesses than other states.
"Someone who's in the region and already successful, who figured out a plan, it's better to buy them than try to do it yourself. The chances for failure are much higher when you do it yourself vs. buying a successful operator," Blaige said.
"I see it like California. Trying to start up in California is difficult because of all the regulation, and it's hard to operate there. So, someone who's been successful already, dealing with all this stress in the region, is going to be more successful going forward," he said.
Blaige said he sees interest in the region from both North America and Europe. But he also sees companies based in Latin America looking to make acquisitions themselves.
"Within the Latin American region, I would say there's strong activity across all materials and packaging structures," he said. "Both inbound and outbound deal activity. Many companies begin buying within their region and also companies within their region buy outside, all over the world.
"There are very large and successful companies in Latin America, and they're very active. But you don't hear about that as much," said Blaige, who is CEO at his Chicago-based M&A firm, Blaige & Co.
He sees Peru, Colombia, Brazil and Ecuador in South America as well as Mexico and Central America as areas of M&A opportunity.
Political or economic instability in some countries, such as Venezuela, make M&A more difficult. And Argentina is a difficult market these days due to high inflation, Blaige said.
Latin America is part of a continuing global consolidation in the packaging industry, the M&A adviser told the conference crowd.
"There's a huge consolidation going on. Why? Because packaging is a very fragmented industry," he said. "There are many opportunities in Latin America.
"Why? Because companies are looking for growth. So, Latin America is a growing environment, region and economy. And that's attracting a lot of investment capital, a lot of acquirers," Blaige said.