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Multilatinas: Continued Expansion

Despite the current financial crisis, multilatinas are poised for continued expansion in pan-regional Latin markets and internationally.


As Latin American economies grew up to 2008, companies in the region have been expanding their businesses from their home countries into other Latin American countries. Now, these companies, so-called "multilatinas," are competing with other multinational companies as never before by expanding outside Latin America into other emerging markets, as well as First World countries. 

A multilatina is a multinational company based in a Latin American country that has become an economic titan in its home country, dominated its domestic market and sought additional markets in additional countries to facilitate its growth.

It has been fascinating to work closely with multilatinas for the last 30 years, first as a legal advisor to their foreign lenders, then to their foreign partners, later to domestic ones and, lately, as counsel to many of them. I also serve as an independent board member on a number of multilatinas.


The overwhelming domestic success the companies have achieved coupled with the leadership of a new generation of better-trained executives, the need to expand into additional markets to continue growth, and the availability of cheap money over the last several years to finance growth and acquisitions have combined to create a stimulating environment for multilatina expansion. The last decade has been especially propitious in terms of liquidity in capital markets to facilitate growth, as multilatinas began to compete on a more equal basis with multinationals for access to financing. 

They have expanded from their home countries to other countries in Latin America, and, significantly, to international markets outside Latin America. Multilatinas, which in the past may have restricted their growth to only neighboring countries, have also expanded throughout all of Latin America and into North America, Europe and emerging markets worldwide.

Take, for example, the experience of our client Grupo Bimbo, the leading Mexican baking company. They have been so successful in dominating the Mexican marketplace that no major competitor has survived. Multinational companies that tried to compete all withdrew from the Mexican market. So a company like this, very efficient and capable, can continue to grow only by going to other countries. They went to Central and South America and have become a major or dominant force in every country they've entered. Today, they have approximately 40 percent of the marketplace in Brazil. They entered the United States market and acquired Entenmann’s and Thomas's, as well as sold their “nostalgia brands” that are sold to Americans of Hispanic heritage. Recently, they also entered the China and Czech Republic markets as well. They are a truly multinational company.


China's domestic market is becoming more attractive to certain kinds of multilatinas, as is India’s, given the growth of their middle class markets. Multilatinas are also expanding into Europe, as demonstrated by the merger of the Brazilian beer and beverage company Ambev with the Belgian beer company Interbrew. The merged company, InBev, recently acquired Anheuser Busch in the United States, to form Anheuser-Busch InBev, the largest beer company in the world.

Other examples of expansions by multilatinas are the acquisition of US and Canadian companies by Grupo Comex, a Mexican paint manufacture, and its rapid expansion in China; the acquisition of Canada’s second largest mining company by the Brazilian mining company, Vale, now the largest iron-ore producer in the world, and its acquisitions of other assets in countries as varied as South Africa and Australia.

Multilatinas are now being managed and led by a new generation of better-trained and educated executives. They are now as prepared as their counterparts in North America, Europe or Asia to lead their companies and their growth. Banco Itau, Grupo Bimbo, FEMSA, Vale and many others are clear examples of multilatinas with world-class management teams.


Multilatinas have generally moved out of their "conglomerate" approach of the past to a more focused business model where companies in a group are generally interconnected and make better business sense. In the past, multilatinas were generally highly leveraged. But now they are better capitalized than ever, and they treat debt with respect derived from lessons they learned during successive Latin American financial crises.

Stricter corporate governance than in the past is also now in place and multilatinas are benefiting from it, particularly since many of these giants are still controlled by families or groups. Many multilatinas are now listed on local and international stock exchanges and have adopted corporate best practices, transparency, accountability and respect for minority rights.

In sum, the leading multilatinas have evolved into multinational companies no different from those in First World economies. Grupo Bimbo, for instance, is interested in energy savings and conservation. It recently invested in a renewable energy facility in Mexico and is becoming environmentally responsible, just as any U.S. or European multinational, if not more.


They face the same challenges that other multinationals are facing. They can't escape the market realities. This financial crisis is a crisis in confidence and capital. If your company is well-capitalized and if you have stakeholder confidence, it should be able to survive.

One advantage that multilatinas have over other non-Latin multinationals in facing the current crisis is that their leadership has lived through two or three financial crises. This gives them a competitive advantage over some of the multinationals they compete with whose management may not be as well versed on crisis management.


So, will multilatinas continue to expand in the near future? Yes. They have excellent management, innovative leadership, strict corporate governance, solid capitalization, and highly-trained talent, which provide them with a solid basis for continued expansion. If they are well-financed and as well-managed as their peers, they will be driven by a need to continue to diversify their risk geographically and will continue to move into different markets. Despite the current financial crisis, quite a few are poised for continued expansion in pan-regional Latin markets and internationally. And, like any other multinational, they will want to continue to consolidate their industry.

In particular, because of the current financial crisis, multilatinas will have opportunities to acquire companies in First World markets, some at a fraction of what the price would have been a year ago.

Taking advantage of all these opportunities will, of course, depend upon a multilatina's ability to finance acquisitions. But multilatinas are now playing on a much more leveled playing field with multionationals, in terms of access to funding. A multilatina with a strong track record and proven synergies should be able to convince financial institutions that their growth opportunities—both in Latin America and internationally—are worth financing.


Our client Grupo Bimbo's latest U.S. acquisition is a very recent example of a well-run multilatina's ability to take advantage of these continuing cross-border opportunities. We represented Grupo Bimbo in its acquisition of the U.S. fresh bakery business of Weston Foods, Inc., from Dunedin Holdings S.a r.l., a subsidiary of Toronto-based George Weston Limited, for $2.380 billion.  The acquisition will create one of the largest baked-goods companies in the world — an impressive achievement for what was once a solely Mexican enterprise.

Alexis E. Rovzar is a partner in the Latin America Practice of White & Case, based in the New York office.  He served as the founding partner in charge of the Mexico City office from 1995 to 2005. 

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