The M&A landscape in Central America is undergoing a period of transformation, shaped by globalization, regional integration, and the unique challenges of operating in a region characterized by diverse legal, economic, and political contexts. The recent surge in activity across sectors offers valuable lessons about the opportunities and risks inherent in mergers and acquisitions while highlighting the critical role that local expertise plays in the successful execution of cross-border transactions.

Over the past two years, as interest rates stabilize and markets recover, Central America has become increasingly attractive for M&A activity. Transactions such as SBA Communications’ $975 million acquisition of Millicom's telecommunications towers across multiple countries highlight the significance of connectivity infrastructure as the region moves toward deploying 5G networks. Similarly, Davivienda’s acquisition of Scotiabank’s operations in Costa Rica, Panama, and Colombia underscores the growing importance of regional consolidation in banking, as institutions strive to achieve economies of scale in an increasingly competitive environment.

Costa Rica has also emerged as a hub for technology and nearshoring. The acquisition of Proximity, a Costa Rican software development firm, by 10Pearls illustrates how the country’s talent pool and proximity to North America are driving its role in digital transformation initiatives. Meanwhile, traditional sectors like textiles remain resilient. Tegra’s sale of its operations in Honduras and El Salvador to SAE-A Trading highlights the region’s continued importance in global supply chains.
 

Lessons from Central America’s M&A Activity

Recent transactions reflect three key lessons for investors and advisors alike.

First, the development of reliable infrastructure has become a prerequisite for sustained growth. Telecommunications is central to this effort, enabling not only economic efficiency but also broader social inclusion. Investments in connectivity, such as SBA Communications’ acquisition, illustrate how infrastructure improvements can catalyze broader economic benefits while meeting the demands of a digitally connected world, particularly as companies adopt artificial intelligence to enhance operations.

Second, the importance of regional integration cannot be overstated. While Central America is made up of smaller, individual markets, success often requires operating across multiple jurisdictions. Transactions like Davivienda’s highlight the need for businesses to navigate regulatory, political, and operational nuances. Achieving value from these deals depends on the ability to address these differences while leveraging the synergies of regional scale, and at the same time accommodating small but critical cultural adjustments. Balancing effective risk management with the commercial flexibility needed at the local level remains a significant challenge for many companies but is essential to unlocking the full potential of M&A.

Finally, evolving regulations present both challenges and opportunities. For example, Costa Rica’s implementation of data protection laws added complexity to Equifax’s acquisition of Datum and Teletec, requiring careful compliance planning. These regulatory shifts can act as barriers but, when navigated effectively, also provide opportunities to establish competitive advantages by ensuring long-term operational stability.
 

The Role of Local Expertise

The successful execution of M&A deals in Central America depends heavily on localized expertise. The region’s diverse regulatory environments, cultural nuances, and business practices require a deep understanding of local conditions. Moreover, many transactions involve not just compliance but alignment with the broader cultural and economic realities of the region.

BDO Costa Rica has consistently demonstrated the importance of this local presence by facilitating the seamless implementation of complex transactions. While not leading the global legal strategy, BDO Costa Rica has played an integral role in the local execution of landmark deals.

During Pfizer’s acquisitions of Warner-Lambert and Wyeth, BDO Costa Rica provided essential support in ensuring compliance with Central American and Caribbean regulations, aligning local efforts with the company’s global strategy. The firm’s involvement was equally critical during Pfizer’s divestitures, such as the sale of its nutrition business to Nestlé and the spin-off of Zoetis. These transactions required careful coordination across jurisdictions and an ability to adapt global strategies to regional realities.

Similarly, in Equifax’s acquisition of Datum and Teletec, BDO Costa Rica’s understanding of the newly implemented Data Protection Law was pivotal in ensuring regulatory compliance without disrupting operations. These examples underscore the value of a partner who can bridge the gap between global ambitions and local conditions.
 

Opportunities and Challenges in the Years Ahead

As Central America continues to integrate into the global economy, new opportunities for M&A are emerging. Telecommunications remains a promising sector, driven by increasing demand for connectivity and digital inclusion. Technology, medical devices, and nearshoring are poised for further growth, as companies leverage the region’s skilled and cost-effective workforce, proximity to key markets, and Costa Rica’s extensive network of free trade agreements.

Additionally, the real estate and hospitality sectors are thriving, driven by the region’s year-round favorable climate, growing appeal to global travelers, and increasing demand for luxury and eco-friendly accommodations. In these areas, BDO Costa Rica plays a significant role, handling multiple transactions annually. These range from advising on the acquisition or sale of boutique luxury hotels to assisting developers in securing strategic real estate for future landmark projects, further demonstrating the region’s potential as a premier destination for investment and development.

However, challenges persist. Regulatory frameworks are evolving, requiring companies to remain agile and proactive. Political and economic volatility in some countries adds another layer of complexity, emphasizing the importance of comprehensive due diligence and robust risk management. Additionally, U.S. immigration policy under the Trump administration will have far-reaching implications for countries and businesses alike, with trade tariffs and barriers increasingly being used as leverage to advance diplomatic positions. The recent short-lived trade spat between the U.S. and Colombia over immigration policy serves as a reminder of how quickly geopolitical dynamics can influence economic policy and business strategies. For investors, the ability to navigate these multifaceted challenges will play a critical role in determining the success of their ventures in the region.
 

The Role of Integration and Teamwork

For those navigating this landscape, the lessons from recent transactions are clear: success requires not just vision but also the ability to effectively execute on the ground.

BDO Costa Rica embodies the One BDO strategy, which fosters seamless collaboration across the global network to provide consistent, high-quality service in an increasingly interconnected world. This strategy is essential as cross-border M&A transactions grow more complex, requiring local expertise fully integrated with global coordination. Recent transactions supported by BDO Canada and BDO Spain highlight the strength of this approach, as BDO Costa Rica worked closely with other LATAM member firms to bridge time differences, navigate cultural nuances, and manage legal complexities. By continuing to advance the One BDO strategy, we ensure that businesses and advisors are equipped to unlock the full potential of M&A opportunities in the Americas, delivering solutions that transcend borders and meet the evolving demands of global markets.