Brazil M&A | Bain & Firm

In keeping with world tendencies, Brazil’s deal exercise reached a 10-year peak after a robust 2020. Transaction worth totaled $66 billion in 2021, which is lower than the worth reached in 2010, however that was a banner 12 months through which the concession of pre-salt to Petrobras and a number of consolidations within the telecom business pushed the numbers sky-high. The ten-year document complete deal worth in 2021 even considers Brazilian actual depreciation towards the US greenback.

Giant offers (these valued at greater than 10 billion Brazilian actual) accounted for about 50% of the overall deal worth in 2021. Most offers have been scale offers aimed toward consolidation, they usually cowl a various set of industries. For instance, in healthcare, Hapvida Participacoes e Investimentos and Notre Dame Intermedica Participacoes merged. In utilities, Cedae concession, the Rio de Janeiro sanitation firm, was acquired by Iguá and Aegea. The vitality business’s huge deal was Raizen’s buy of Biosev. In auto rental, Localiza merged with Unidas, and retail noticed Carrefour purchase Grupo BIG.

In the meantime, small deal exercise received a lift from the elevated variety of acquisitions within the tech sector. Tech offers, which have doubled in depend since 2016, presently account for round 30% of the present variety of offers, however they account for under about 5% of complete deal worth.

What’s behind these numbers? A optimistic macroeconomic atmosphere propelled by low rates of interest and a good foreign money for worldwide traders is on the prime of the record. Additionally, 2021 noticed an increase within the quantity of capital raised via preliminary public choices (IPOs) and used for acquisitions. There was a relentless push for innovation through the acquisition of latest know-how capabilities. And profitable, well-capitalized firms acquired less-strong rivals, a lot of which have been weakened through the pandemic. A ultimate but vital issue was the federal government’s push to promote state-owned property, corresponding to refineries, and its sale of water, sewage, and different concessions.

Whereas all these forces performed a crucial position in sustaining M&A exercise, two of them are particular to the Brazilian state of affairs and benefit particular consideration:

• the rising variety of IPOs; and
• the federal government agenda of promoting state-owned property.

The IPO issue

After a 12-year historic excessive in 2020, with practically 43 billion Brazilian actual raised in 26 IPOs, 2021 set a brand new document, with 64 billion Brazilian actual raised in 46 IPOs. This optimistic state of affairs can be influenced by macroeconomic components, corresponding to excessive liquidity, low rates of interest, and a steep improve within the variety of native traders in search of greater returns in capital markets.

In accordance with IPO prospectuses, 50% of the businesses that had an IPO in 2021 deliberate to deploy a part of the proceeds towards acquisitions, with 61% of them in the end concerned in acquisitions (see Determine 1). But there may be proof that extra purchases could also be forthcoming in 2022: All the businesses that went public in 2020 and that deliberate to make use of these IPO proceeds for M&A ultimately made at the least one acquisition.