IMAP Expands its Footprint in LATAM with new Partner in Paraguay

Leading Financial Institution in the Paraguayan Capital Markets

Headquartered in Asunción, the capital and largest city of Paraguay, Investor Finance was established in 2010. Over the last 12 years, we have worked hard to secure our position and become recognized as a leading financial institution in the capital markets in Paraguay and a trusted partner.

Since starting out, we have expanded our operations considerably, and now have a team of over 200 professionals. We provide eight key service offerings and have served over 3,000 clients - and our business just keeps on growing.

With over $200 million in debt placements, and having executed 18 project finance and valuations, as we speak, we have approximately $700 million of assets under management.

Paraguay — A Rising Star for Investment

We see numerous key factors that together, create favorable market conditions which have led to Paraguay not only becoming a strong economy but also an increasingly attractive option for investors.

Mergers & Acquisitions - Paraguayan Key Sectorial Trends & Opportunities

In 2021, our top performing sectors in terms of profitability in the country were: Technology, Financial Services, Pharma, Telecommunications, Food, Real Estate, Energy, and Education. Most of these sectors present themselves as opportunities for higher M&A activity as concentration ratios remain very low. Recent transactions in the market include Credit union Ueno buying a SaaS company, J Fleischman, and a software development company, Itti. Shell also reentered the Paraguayan market after 15 years, with the purchase of 50% of local group Barcos y Rodados.

Opportunities for M&A as concentration ratios remain very low in many sectors

We have identified the following industries to have strong growth potential. These have not only been growing in importance in relative GDP terms but are also facing intense competition, thus needing to generate efficiencies primarily by making greater investments.

M&A Trends & Opportunities in Paraguay

Agricultural & Livestock

• Agriculture: Extensive land with high productivity levels for commodities. Potential for developing more sophisticated crops for export.
• Livestock: Highly competitive meat quality with growing demand worldwide and opportunities for vertical integration.

Insurance & Banking:

• Insurance: Low concentrated market with a high number of players (36). Opportunities for improving technical and investment efficiencies and new product development.
• Banking: Mainly composed of commercial banks with high profitability, opportunities for developing microfinance products and the corporate banking sector.

Education

• Growing market due to rising competition in the labor force. The academic rigor of undergraduate programs is still behind regional comparables as universities offer almost only traditional majors.
• Space to grow in technical careers and increased undergraduate offers.

Healthcare

• Good plans and coverage are only available for middle-high and high-income individuals. Only 8% of the Paraguayan population has healthcare cover.
• Opportunity for potential acquisitions of new competitors that have been covering the low-income bracket without strong financial support.

Real Estate & Infrastructure

• Underexplored real estate market (high-quality industrial and commercial assets). Paraguayan real estate investments have focused on the upper-middle-class sector — a huge percentage of the market untouched.
• Underdeveloped real estate financial market.
• Infrastructure: Important deficit in national infrastructure and industrial projects.

Consumer

• Paraguay has typically been a net importer of consumer goods. In recent years, more local industries are developing, targeting consumer goods substitution and increasing export capacity.
• Paraguayan consumer goods (food in particular) have the potential to reach worldwide consumers due to competitive infrastructure and labor costs.

Exponential Increase in M&A Deals Since the 1990s

The number of M&A deals in Paraguay has significantly increased since the 1990s in both volume and complexity. Our projections moving forward are very positive as more regional investment is coming in, and the country's macro-outlook remains positive.

Key fundamentals for prospective local M&A activity growth include:

Financial Market Development:

Over the last 10 years, institutional investors have increasingly started to explore financial instruments other than Certificates of Deposit (CDs) as investment vehicles. This has led to a larger local capital market, built more trust, and improved the regulatory framework for investments in general. It has also driven investors to consider alternative investments and mergers and acquisitions opportunities.

Intergenerational Change

Most middle-market companies in Paraguay are primarily family owned, and led by a generation of very conservative executives, which have traditionally seen mergers and acquisitions as a declaration of weakness rather than a means of creating value.

As Paraguay is a small country, traditionally owners have not wanted the market to know that their company was "for sale", afraid this status would put in jeopardy potential new commercial contracts or their relationships with suppliers. As a new generation of leaders take charge, they bring a new perspective and more awareness of the value creation opportunities this tool can bring to both buyers and sellers.

The current geopolitical situation regarding Ukraine and Russia has already had its impact on the Paraguayan economy. The rise in oil prices and agrochemicals resulted in a year-on-year inflation rate of 9.3% in February 2022. Meat exports in Paraguay, one of the country's main economic industries, decreased by approximately $330 million, representing 20% of total meat exports. In the local M&A market, the Agrochemicals and Energy Distribution sectors are the most sought-after industries for vertical integration.

Joining IMAP - Expanding our M&A Capabilities & Reaching new Markets

Our objective over the next five years is to be the leading partner in investment banking services in Paraguay. To achieve this, we are looking to develop our corporate finance business and specifically our M&A capabilities. At the same time, as we look beyond Paraguay, it is important for us to find the right partner to enable us to expand our international reach.

With IMAP, we have joined one of the top global mid-market advisory partnerships, which has well-established relationships with key market players globally, access to debt and equity capital, and will allow us to connect with over 450 highly experienced dealmakers around the world.

IMAP can help us reach new geographies and markets, and we bring to the table our proven track record, experience, and connections, as well as our expertise and knowledge of the local market. At the same time, we, like many other IMAP partners around the globe, offer additional financial services, so this opens the door to collaborating in other areas, as well as M&A.

Since joining IMAP, we have already connected and engaged with partners in Latin America and Europe on several sell-side leads and will continue to actively contribute and collaborate further as our bond with the organization deepens. We truly believe that active collaboration, communication, and joint deal origination will help our IMAP clients consistently create value. Furthermore, as digitalization and globalization deepen, investing in multiple geographies no longer represents an obstacle.