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TTR article based on an April 2015 interview to CAPITAL INVEST.

H1 2015 perspectives on M&A in Brazil

Economic excesses of recent years will require structural adjustments over the next two years to resolve, but after biting the bullet, Brazil’s economy is expected to resume strong growth.

Brazil still needs significant infrastructure, not just to prepare for the 2016 Summer Olympics, but to support sustained growth for the medium term, and port and road projects will stimulate linked sectors like agriculture, manufacturing and natural resources.

Despite last year’s presidential elections, World Cup Football and tepid growth, 2014 was a record year by number of transactions and 2015 is looking to be very good as well, according to Nestor Casado, Managing Director of CAPITAL INVEST - M&A Advisors in São Paulo.

“At the moment there are more big businesses for sale than a year ago. The market is rather pessimistic; there are many good companies on the block that weren’t for sale a year ago,” he said, adding, “of course you have to work harder to find the good ones.” A gloomy outlook in Brazil could spell opportunity for buyers committed to Latin America’s biggest economy in the long run, he said, noting pessimism could actually bring about more deals.

“There will always be opportunities in Brazil, and when there’s a crisis, the best acquisitions are available, like now,” he said.

Casado pointed to confidence indicators at a 10-year low, but said he sees the glass half full. Opportunities abound in energy, healthcare, IT, distribution, manufacturing and industrial products and services, he said, noting a spike in industrial deal making.

In the energy sector more investment is needed in both generation and distribution. In addition to more hydroelectric deals, he said additional renewable energy tenders could be expected.

Brazil is squarely in the sites of buyers from China, and sources tell TTR of likely deals in telecom, natural resources and agriculture. “We believe this year we will see more opportunities closing with Chinese investors,” Casado said, adding, “they really see Brazil in the long-term.” Investors from the EU, US and Canada are also bullish on Brazil, Casado noted. We’ll see more deals in which international companies make small, tentative acquisitions before aiming at market leaders, said Casado. CVS made a relatively small acquisition in 2013 when it bought Drogaria Onofre and now has larger players on its radar, he said for example.

 

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