Mergers and acquisitions heat up again in Brazil after falling in the 1st quarter

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*article extracted from CNN Brasil. (Apr’2022)

The mergers and acquisitions (M&A) market in Brazil has regained traction in recent weeks after transactions have reduced in the country amid the combination of negative factors in the macroeconomic scenario, including the war in Ukraine.

There was a drop of about 15% in the number of deals in the first quarter compared to the same period last year, according to data from Dealogic mentioned by specialists during an event organized by the Brazilian-American Chamber of Commerce, this Tuesday morning (19) .

According to Mattos Filho’s partner, Luciana Pietro Lorenzo, it is possible to notice a greater movement in M&As in recent weeks, mainly in the sectors of education and fintechs, startups in the financial sector. “I’m optimistic. Business is coming back,” she said.

The head of Financial Advisory at Vinci Partners, Felipe Bittencourt, said that despite the drop in business during the first quarter, Brazil is facing an opportunity to advance in the M&As market.

“Brazil is the biggest economy and has a strong democracy. We are definitely facing an opportunity to move forward and place the country at another level of the quality of capital that we attract,” he said, referring to the entry of foreign resources into the country.

For the head of M&A for Brazil at UBS, Fabio Mourão, Brazil is also facing an “enormous” opportunity, when considering the global reorganization of supply chains and the need for greater diversification in trade as an effect of the pandemic and of war.

“We had a combination of factors (…) war, inflation, when you put them all together, there are concerns, but it is not a Brazilian phenomenon, we see this in other markets like the US”, he said, when explaining the factors that caused the drop in prices. M&As at the beginning of the year.

According to him, the exchange rate, one of the most important variables in evaluating investments in the country, should remain at current levels due to dollar flows driven by high interest rates and the high prices of commodities exported by Brazilian companies.

Mourão, however, pondered that an increase above the expectations of the Fed Funds, the basic interest rates in the United States, could cause an increase in the cost of capital that would have an impact on the acquisitions business.

Bittencourt, from Vinci Partners, said that the reduction in transactions seen in the first quarter already occurred in the past, when Brazil navigated high interest rates, as it happens now. “We have more transactions when there is a more stable outlook for the economy,” he said.

*Article originally published on CNN Brasil on 4/19/2022.

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