The Brazilian M&A outlook for the coming months

Mergers and acquisitions in Brazil are likely to be stable this year in terms of number of deals after rising in recent months, according to risk and financial advisory firm Kroll.

"We’re likely to end the year with the same level of operations as last year, between 1,400 and 1,450 transactions," Alexandre Pierantoni, the head of Kroll’s corporate finance and M&A area, told BNamericas, underlining that the stable outlook is better than the projected scenario for global M&As which are expected to fall 10% this year.

Although in the first months of the year the number of deals in Brazil dropped, in recent months that has changed. 

In the 12 months ended July, the most current data available, the volume of transactions totaled 1,413, a rise of 0.9% on the prior 12-month period.

According to Pierantoni, the expectation of a cut in interest rates in the US in the coming months is likely to serve as a tailwind for M&A operations in Brazil, despite the forecast of stubbornly high domestic rates.

"The reduction of interest rates in the US is important to increase the participation of international investors in M&A operations in Brazil. The international investor has already represented 40% of M&A transactions in Brazil and currently this level is around 15%," said Pierantoni, underscoring that the November presidential election in the US could bring volatility.

In terms of segments, the Kroll executive highlighted technology, energy, consumer goods, infrastructure, health and education as the main drivers of new operations. 

"M&A transactions in Brazil are very diversified in terms of segment and this helps the country to not suffer large variations in transactions in times of great volatility," he said.

Kroll’s report (in Portuguese) on M&A operations in Brazil can be seen in the Documents box in the top-right corner of the screen.

PRIVATE EQUITY 

Private equity funds with operations in Brazil have in recent years faced a challenging scenario amidst the persistently high interest rates. 

The steep rates make it more difficult for companies to launch IPOs, which are one of the main private equity strategies to sell their assets.

"What we are starting to see gaining traction in Brazil is M&A transactions among private equities themselves. This type of transaction is very common in the US, where there are multiple private equities that invest in companies at different stages of maturation and this is also beginning to happen in Brazil, amid an equity market that is still closed to IPOs," said Pierantoni.

According to figures compiled by Kroll, in July private equities were involved in 36.42% M&A transactions announced in Brazil, compared with 33.19% in 2023 and 31.76% in 2022.