![Brazil Brazil](https://cdn-www.bnamericas.com/img/flags/BRAZIL.jpg)
Energy transition expected to guide Brazil M&A transactions
![Energy transition expected to guide Brazil M&A transactions](https://cdnimg.bnamericas.com/wxanUHqjQIzxtAwKWCiLRTKNMLphVSAgUlwEkkHWXojqPspBRkKKEaYxohNdLUsT.jpg)
M&A operations in Brazil's mining, oil and gas, and electric power sectors are likely to be strongly influenced by the global energy transition.
With companies looking to reduce greenhouse gas emissions, assets in the sectors are expected to attract investors previously interested in other industries. Some perceptions of risk have also changed, with matters related to ESG gaining prominence in the valuation of assets.
KPMG partner Paulo Guilherme Coimbra talked with BNamericas about the M&A trends in the sectors.
BNamericas: What is the current stage of M&A movements in Brazil for assets linked to natural resources – energy, oil and gas and mining?
Coimbra: First, it’s worth saying that if we look at the general scenario for M&As, we still see that it is a challenging one, mainly due to the current high interest rates that reduce liquidity in Brazil and worldwide.
Now looking at the natural resources segment, we have seen some interesting changes in the profile of investors and operations.
In the first months of the year, we’ve noticed an increase in the interest of Asian investors in relation to assets in Brazil and I believe that this is linked both to the result of the electoral process in Brazil and issues related to the stronger climate agenda in the country.
Given this, I see a lot of interest in assets in Brazil coming from investors in Japan and China. There is a flow of foreign investors looking at Brazil today that wasn’t there before.
BNamericas: Why are assets related to natural resources on investors' radar screens?
Coimbra: The entire natural resources sector is associated all over the world in some way with the strong appeal related to the energy transition, so electricity, oil and gas, and mining are on that list.
There are companies currently from all sectors wanting to reduce their carbon footprint and others changing portfolios, so these are triggers that move M&A operations in these segments a lot.
BNamericas: In the mining sector, what would you highlight within this trend?
Coimbra: The mining sector has been without major M&A operations for a long time and we expect that with all the issues related to the energy transition, this segment will see an important advance in the volume of transactions linked to minerals associated with the energy transition.
Given this, we’ll tend to see a mix of transactions; from a company in the sector buying another rival to even companies from other segments, such as automakers, which will assume minority stakes in mining companies that produce strategic minerals for the production of vehicles.
I was recently talking to a client who is a large automaker, who said that today in a vehicle assembler, 30% of the focus is on the company's core business and 70% is on issues related to measures to reduce emissions and autonomous vehicle solutions.
We will also see in the mining sector many large companies looking at the assets of small companies that offer technological solutions for the mining area.
BNamericas: In the oil and gas area, what are the triggers for operations?
Coimbra: There are two movements in this sector.
The first thing that we still need to understand better are [state-run oil giant] Petrobras' business strategies and everything related to the production-sharing regime, operations in the presalt areas. This is a segment that involves major global players, who are looking at Petrobras' business strategies in order to define their strategic position in Brazil.
At the same time, there is movement that is more in the area of shallow waters and onshore, and here we have several companies of different sizes active, some selling assets and others entering the sector to increase the efficiency of those assets that already exist.
BNamericas: What are your expectations for M&As in these segments in the coming months?
Coimbra: In general, looking back, the first and second quarters were still affected by the government transition in Brazil, with some operations being delayed.
I see the market heating up in the second half onwards, due to the reduction of political uncertainties and also to the central bank's indication that there will be a cut in interest rates, which opens a window for IPOs.
My expectation is for an increasing number of M&As in the second half.
BNamericas: How important is monitoring ESG issues for companies and investors evaluating assets in these segments?
Coimbra: The change in mindset of investors now compared to what happened years ago is huge.
Today there is a need for a company that is being sold to provide robust guarantees regarding the tracking of its entire supply chain, ranging from labor issues to environmental issues.
Several investment funds currently have severe restrictions on making investments in companies that do not have a clear ESG policy.
There is a debate today in the financial market about whether ESG practices reduce companies' funding costs, but I would say that for an M&A, ESG issues are already quite noticeable.
BNamericas: If the tax reform being debated in congress generates tax increases for sectors such as mining and oil and gas, could it somehow affect M&A operations?
Coimbra: Investors need stability. Every time there is a discussion that can change some aspect of the target sector of an acquisition, the level of investor attention increases.
If this tax reform actually results in an increase in taxes for these sectors, this will have a direct impact on the valuation of operations.
Even for investors today who are already positioned in companies in these sectors, if there is a tax increase, they will see the valuation of these assets in the portfolio change.
Subscribe to the leading business intelligence platform in Latin America with different tools for Providers, Contractors, Operators, Government, Legal, Financial and Insurance industries.
News in: Mining & Metals (Brazil)
![TriStar Gold secures preliminary license for Brazil project](https://cdn-www.bnamericas.com/img/sectors/miningmetals_2.jpg)
TriStar Gold secures preliminary license for Brazil project
The gold project license was obtained from Pará state’s environment department.
![BNDES bolsters support for energy transition projects](https://cdn-www.bnamericas.com/img/sectors/miningmetals_1.jpg)
BNDES bolsters support for energy transition projects
The Brazilian development bank will support a lithium project with US$87mn and help sustainable aviation fuel initiatives get off the ground.
Subscribe to Latin America’s most trusted business intelligence platform.
Other projects in: Mining & Metals (Brazil)
Get critical information about thousands of Mining & Metals projects in Latin America: what stages they're in, capex, related companies, contacts and more.
- Project: Limoeiro
- Current stage:
- Updated:
1 month ago
- Project: Jauru (Mirassol D'Oeste)
- Current stage:
- Updated:
1 month ago
- Project: Morro Sem Boné/Morro do Leme
- Current stage:
- Updated:
1 month ago
- Project: Nova Olinda do Norte
- Current stage:
- Updated:
1 month ago
- Project: Itacoatiara
- Current stage:
- Updated:
1 month ago
- Project: Mangueiros
- Current stage:
- Updated:
1 month ago
- Project: Cabaçal
- Current stage:
- Updated:
1 month ago
- Project: Paulo Afonso Complex (Gameleira, Polo, Pojuca, Grota Funda)
- Current stage:
- Updated:
1 month ago
- Project: Expansion of Serra Azul (ArcelorMittal)
- Current stage:
- Updated:
1 month ago
- Project: Mossoró
- Current stage:
- Updated:
2 months ago
Other companies in: Mining & Metals (Brazil)
Get critical information about thousands of Mining & Metals companies in Latin America: their projects, contacts, shareholders, related news and more.
- Company: Calcário Mato Grosso Indústria e Comércio  (Calcário Mato Grosso)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Pirecal Pirenopolis Calcário Ltda.  (Pirecal Calcário)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Carbonífera Belluno Ltda.  (Carbonífera Belluno)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Guidoni Ornamental Rocks Ltda.  (Grupo Guidoni)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Mineração Corcovado Granitos  (Mineracao Corcovado)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: MBL Metais Básicos Ltda.  (Grupo MBL)
-
MBL Basic Materials became a reference in the mining sector with the extraction and marketing of stones and gravel that contribute to the development of the central-west of Mina...
- Company: Paupedra Pedreiras Pavimentações e Construções Ltda.  (Paupedra)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Pedreira Irmãos Machado Ltda.  (Pedreira Irmãos Machado)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Caltins
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...