| SAO PAULO, April 1
SAO PAULO, April 1 Mergers and acquisitions
activity in Brazil had an encouraging start to the year, as
buyers took advantage of a weaker currency and cheaper
valuations to clinch deals in Latin America's largest economy.
Brazil's M&A deal flow remained robust despite mounting
global market turmoil stemming from the Ukraine political crisis
and eroding confidence in Brazil as growth slowed and inflation
quickened. Concerns surrounding elections later this year helped
bring buyers and sellers closer in some cases, speeding the
conclusion of some transactions that had lingered on for months.
Companies announced about $14.21 billion worth of deals in
Brazil during the first quarter, up from $5.12 billion a year
earlier, according to a quarterly Thomson Reuters report on M&A
activity released on Tuesday. About 108 deals were announced in
the past three months, down from 132 in the year-earlier period.
Strategic buyers toned down their caution towards Brazil,
while private-equity firms were quick to execute their takeover
plans during the quarter. They are openly seeking greater
exposure to Brazil based on their need to get a specific asset,
and not because of the country's status as an emerging market
nation with a massive consumer base, bankers said.
Bain Capital LLC, AmerisourceBergen Corp and
Mexico's Grupo Financiero Inbursa SAB were among
firms that raced to seal the purchase of healthcare, financial
and pharmaceutical companies in the quarter, the report showed.
São Paulo-based Itaú BBA topped Brazil's M&A league tables in
the first quarter, after advising on 18 deals worth at least
"It was an interesting quarter, full of complex deals and
more selective buyers," Fernando Iunes, global managing director
for investment banking at Itaú BBA, said. "We think the second
quarter will be even better."
Luiz Muniz, managing director and head of Rothschild's Latin
America operations, agrees. As Brazil's October presidential
election could slow activity in the second half, many companies
may look to finalize their planned combinations by June.
"We foresee a pickup in M&A with more activity in
cross-border deals, corporate reorganizations, restructurings,
de-listings and spin-offs," he said. "Firms want to speed up
strategic decisions that were in the offing, just because of the
political calendar. Some will happen, and some others won't."
Itaú topped rankings for both deal value and number of
deals. Grupo BTG Pactual SA, Latin America's largest
independent investment bank, ranked second in number of deals,
while Rotshchild was No. 2 in terms of deal value.
Compared with the fourth quarter, the value of deals
announced in Brazil fell 62 percent from $38.26 billion, with
the number of deals slumping 39 percent from 173 transactions.
Many investors expect political wrangling ahead of the
election to further weigh on confidence, which has already been
rattled by a series of erratic government policy decisions and
increased state meddling in the economy.
"The election could weigh down on confidence and have an
impact on the way people perceive the outlook for Brazil," Hans
Lin, co-head of investment banking at Bank of America Merrill
Lynch's, said in an interview.
Yet in recent months, signs of a more business-friendly
economic policy framework emboldened bankers, who depend on
merger advisory services for about half their revenue in Brazil.
President Dilma Rousseff's push to woo investment in
infrastructure is fanning optimism that interference will wane.
Brazilians elect a new president, federal and state
lawmakers and 27 governors in October. While early polls show
Rousseff as a clear favorite for re-election, opposition
candidates could gain ground if growth falters or inflation
accelerates further, analysts say.
Marco Gonçalves, head of M&A at BTG Pactual, expects
private-equity funds to seek more takeovers now that Brazil's
currency, the real, might slip further this year. A
weaker real, which dropped over 11 percent in the past year,
makes it cheaper for dollar-funded buyout firms to buy assets in
"While the price correction already took place, Brazilian
assets look very attractive for any buyer," Gonçalves said. He
foresees robust advisory work for BTG Pactual this quarter.
Bain hired Itaú BBA to help on a $862 million purchase of
healthcare company Notre Dame Intermedica SA, which was in turn
advised by BTG Pactual. Itaú BBA helped parent company Itaú
Unibanco Holding SA win control of Chilean rival
CorpBanca SA in a $2.2 billion deal. Merrill Lynch advised
CorpBanca in the same deal.
Rothschild, Itaú and BTG Pactual worked together in Cosan
Ltd's announced spin-off of its logistics assets. The
transaction also involves the takeover of America Latina
Logistica SA, the region's largest railway operator.
(Reporting by Guillermo Parra-Bernal; Editing by Meredith