Latin America’s M&A market recorded USD 58.9bn in deal value in 1H26, up 29% year over year and the strongest first half since 1H21. More than one-third of that value came from sponsor-backed transactions, which reached USD 20.7bn across 78 deals — the second highest six-month total on record, according to Mergermarket data.

Activity was concentrated in a handful of blockbuster transactions, however, pushing overall deal count down to 535 from 617 a year earlier.

Sponsor activity followed a similar pattern. Exit value reached a record USD 14.3bn, although four deals accounted for a significant share of the total, including USA Rare Earth’s pending USD 3bn acquisition of Serra Verde Pesquisa e Mineração from Denham Capital Management, Energy & Minerals Group, and Vision Blue Advisors UK.

Buyout value fell by 5% year over year, with 90% of volume driven by just two deals: I Squared Capital’s single-asset continuation vehicle for Peruvian power generator Inkia Energy and a consortium led by General Atlantic acquiring a 24% stake in Mexico’s Grupo Financiero Citibanamex.

Brazil: Sponsors pivot to real-economy assets

Private equity (PE) sponsors in Brazil are increasingly targeting larger, more resilient assets amid high interest rates and macroeconomic and geopolitical uncertainties, including implementation of tax reform and October’s presidential election, said Vítor Lourencini, vice president at M&A boutique Acorn Advisory.

Firms are also shifting away from purely technology-driven investment theses toward infrastructure, sanitation, and other real-economy assets, where cash flows and EBITDA multiples are more predictable, said Matheus Martins, partner at law firm Barcelos Martins Advogados.

As a result, Brazil’s sponsor-backed deal value rose 21% year over year to USD 8.9bn in 1H26, although deal count remained flat at 50 transactions.

Cash-generating sectors such as infrastructure, energy, and real estate are expected to continue attracting sponsor interest in 2H26, alongside climate-related investments in agriculture, water, energy transition, and sustainability-linked businesses, Lourencini said.

Martins expects utilities, mining, and oil and gas to continue producing the largest deals amid a shortage of high-quality assets.

On the technology front, both advisors expect sponsor activity to remain focused on artificial intelligence (AI)-related businesses.

In June, Advent International-backed Skyone acquired cloud provider and data center operator Add IT. In April, I Squared acquired a majority stake in Elea Data Centers, which operates nine data center campuses across Brazil.

Sponsor-backed exit value rose nearly tenfold year over year to USD 5.7bn across nine deals in 1H26, likely supported by alternative liquidity strategies such as secondary transactions and continuation funds, Martins said.

Compass’ USD 650m initial public offering in May ended a nearly five-year drought in Brazil’s equity capital markets. Whether it becomes a benchmark for future offerings remains uncertain, Martins said, noting that IPOs are still viewed more as aspirational milestones than routine corporate strategy.

Compass shares closed at BRL 24 on 22 July, down 21.4% from their IPO price.

Mexico: PE shows no signs of recovery

The General Atlantic-led acquisition of a 24% stake in Citibanamex from Citi accounted for nearly all of Mexico’s USD 2.5bn sponsor-backed buyout volume in 1H26.

“This was a very relevant transaction that demonstrates large investors are still betting on Mexico,” said Sergio García del Bosque, managing director at investment bank Seale & Associates. “However, it should not be interpreted as a private equity boom or as a sign of a broader upward trend in the market.”

The traditional PE model no longer fully fits Mexico because of volatility, limited liquidity, and an underdeveloped exit environment that extends investment horizons, García del Bosque said, adding that many opportunities are better suited to strategic buyers.

Alejandro Garza, CEO of crypto-native venture capital firm Aztlan Capital, said the challenge is less a lack of investor interest or weak fund performance than the limited maturity of Mexico’s PE market and the reluctance of many family-owned businesses to sell.

Family owners often maintain strong emotional ties to their businesses and hold valuation expectations that are difficult to meet, said Jorge Viesca, managing director at Roca Ventures.

He noted that the firm has struggled to complete even one USD 20m-USD 50m acquisition annually.

Mexico City-based Roca Ventures has responded by extending holding periods and expanding into mezzanine financing as private credit demand rises, Viesca said.

Private credit is helping address structural constraints that limit PE activity, including limited access to cash flow-based financing compared with more developed markets, García del Bosque said.

On 16 July, Bloomberg reported that Apollo plans to invest up to USD 20bn in private credit to finance projects in Mexico.

Chile: Tax reform boosts investor appeal

Sponsor-led activity in Chile could regain momentum in 2H26 as investors assess a more favorable tax outlook.

The gradual reduction of Chile’s corporate tax rate to 23% from 27% by 2029 is expected to boost earnings and cash generation, supporting stronger valuations and making Chilean assets more attractive to international PE investors, said Andrés Chirgwin, managing partner at law firm Chirgwin.

Investors also expect the tax reduction to increase liquidity available for acquisitions at portfolio companies.

Sponsor-led activity in the software sector is expected to remain subdued as PE investors adopt a more cautious approach to technology risks and growth assumptions, Chirgwin said.

Renewable energy and mining, particularly investments tied to copper and critical minerals, are expected to remain priority sectors for PE firms, according to a Chilean investment banker.

On 6 July, Ital’s Eni announced it agreed to acquire a 25% stake in EnergyX’s Chilean subsidiary, Black Giant, which is developing a lithium project in northern Chile, for about USD 225m.