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ON THE LEFT: Mergers and acquisitions in the Caribbean

KEVIN PARIKH is CEO of Avasant

ON THE LEFT: Mergers and acquisitions in the Caribbean

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GROWTH IN GLOBAL DEMAND for services, escalating costs and search for new markets give rise to both organic and inorganic expansion of outsourcing across the globe. Latin America and the Caribbean offers mergers and acquisition (M&A) opportunities in a wide range of niche capabilities across the region.

Mexico is primarily known for its capabilities to provide near shore multilingual customer service to United States. Costa Rica and Guatemala are the prominent countries in the region with expertise in providing English contact centre services.

Smaller countries of the region like Barbdaos, Domincan Republic, Puerto Rico, Cuba, and Trinidad and Tobago are centres ideal for small-scale back office and finance and account operations. The larger countries like Brazil, Argentina, Colombia, Peru and Chile have the strength of scale and information technology services combined with a number of vertical specific services.

M&A has become a key lever to support growth strategy in outsourcing industry globally across Asia, Europe and Americas. Significant increase in M&As in the region indicate the overall attractiveness of the market for global investors and future opportunities in the region.

Estimates suggest that only nine per cent of the global M&A deals are in the Latin America and the Caribbean region, which is a small percentage that has grown from around seven per cent in 2010, influenced by regulations and currency variation making the region attractive.

Brazil is the primary market for M&A along with countries like Mexico, Argentina, Chile, Costa Rica, Jamaica, Guatemala, Colombia, El Salvador and Trinidad. The rising number of M&As driven by foreign investors indicates the improving credentials and value of Latin America and the Caribbean region.

Public private partnership laws regarding the formalisation and procedures and clarification of rights of investors and sovereigns in connection with investments provides an attractive opportunity.

Devaluation of currency in large countries like Brazil and Argentina has enabled improved labour arbitrage and attractiveness, focused regional promotion is the need of the hour. Latin America and the Caribbean is often seen by investors as offering a compelling value proposition as a region, a one-stop shop to address the investor community is the need of the hour.

Countries in the Latin America and the Caribbean region need to attract investments as a region and cooperate while they compete in order to leverage the complete value proposition the region offers. Successful regional ventures have shown significant growth and created significant M&A opportunities.

Developing a talent pool with private and non-profit organisations has enabled smaller countries like Costa Rica, Jamaica, Trinidad and Tobago to take the next steps. Moreover, the region has pockets of niche talent which can be leveraged to maximise value to investors.

The value proposition of Latin America and the Caribbean as a region is known and acknowledged in the global investor community, what is needed now is to reach out and realise the potential. There are significant barriers to entry due to cultural, regulatory and market dynamics for foreign investors, leading to M&As and partnerships. Opportunity in the regional market remains small but promises high growth. Delivery capability in the region has become a default strategy for global corporations to address the multilingual market.

Avasant is a United States-based global management consulting firm.