Merger and acquisition activity in Latin America plunged to an all-time low during the first half of the year as the arrival of the new coronavirus stunted deal activity.

Just 199 deals worth $8.1 billion closed during the first six months of 2020, down from 316 deals worth $35 billion in the same period of 2019, according to data from Mergermarket. The 77% decline in deal value is the worst since the firm started tracking activity in the region in 2001.

"As the last region to be hit in late February with COVID-19, about a month after the first case in the U.S. was confirmed, Latin America still struggles to control the spread even as countries outside the region begin to reopen their economies," said Viviana Balan, research relationship manager for the Americas at Mergermarket.

As usual, law firms in Brazil—Latin America's largest economy—occupied the top-three spots for legal advisers in the Mergermarket league table by number of deals, albeit each with fewer deals than last year.

Brazil's Pinheiro Neto Advogados logged 23 deals worth $1 billion while Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados worked 16 transactions worth $1.7 billion and Demarest Advogados was involved in 11 deals worth $404 million.

Lex Mundi firm Brigard Urrutia, from Colombia, and global firm White & Case also made it into the top five by number of deals.

Normally, Brazilian firms would also lead rankings by deal value. However, Mergermarket said deal value from Brazil plunged 75% during the first half of 2020.

That sharp drop in deal flow propelled three global firms to the top of rankings by deal value. Debevoise & Plimpton clinched the top spot, having worked three deals worth $2.3 billion in the region. That's a steep climb versus the firm's rank of 80 in the region by deal value in the first half of 2019.

Weil, Gotshal & Manges, which worked two deals worth $2.2 billion, came in second after having ranked 128 in Latin America last year. Gibson, Dunn & Crutcher rose to third from 13 with a single deal worth 2.2 billion.

Mattos Filho and Brazil's Cescon, Barrieu, Flesch & Barreto Advogados rounded out the top-five firms by total deal value.

Investment Largely on Hold

Mergermarket reported that foreign investors largely held back from the region, with Chinese investment plummeting 89% by deal value during the first half while interest from Japanese investors held steady. Domestic M&A nearly froze during the period. The consumer and agriculture sectors have proven most-resilient.

Looking ahead, Balan said the recovery of M&A activity in Latin America strongly depends on how countries in the region deal with COVID-19. Approaches to the health emergency have varied, with countries such as Chile closing borders and enforcing strict quarantines while the region's two biggest countries by population and economy—Brazil and Mexico—have mostly attempted to maintain business as usual.

"As Latin America was one of the last geographies to be hit by the pandemic, countries are still experiencing growth in case numbers," Balan said. "M&A activity in the region can be expected to remain low for the coming months."

Transactional Track Record, which tracks a broader base of transactions, reported that deals in the region declined 30% by number and 60% by combined value during the first half of the year. Transactional Track Record found 835 deals worth $20.6 billion.

Mauricio Borrero, a partner with Dentons Cardenas & Cardenas in Colombia who heads the firm's corporate practice group for Latin America and the Caribbean, told Transactional Track Record there are signs that "distressed" M&A transactions are on the rise in the region.

"Probably this will be one of the motors of the M&A market over the next 18-24 months," said Borrero, who predicted a return to "normalcy" in 2023.