In the first half of 2011 Brazil saw 142 M&A deals worth US$41bn representing a 15% increase in volume and 24% increase in value over the previous year. According to the newly released Brazilian M&A Outlook survey published by mergermarket and Merrill DataSite®, this trend is expected to continue.
In the second quarter of 2011, Merrill DataSite® commissioned mergermarket to interview investors and executives with recent dealmaking experience in Brazil regarding their expectations for the country’s M&A market for the upcoming 12 months. Survey respondents provided insight into the drivers, recent issues and emerging trends within Brazil.
With a wealth of natural resources and a burgeoning middle class, Brazil’s place in the global economy is growing rapidly. As a result, respondents are confident overall M&A deal flow will continue its recent surge. Over half of respondents point to foreign investment as the main driver of activity, with 64% identifying China to be the most acquisitive foreign buyer of Brazilian assets. Brazilian buyers will also increase their outbound acquisitions, with respondents identifying other Latin American countries and North America as their main targets.
The infrastructure sector is expected to experience significant growth in M&A activity over the next 12 months, according to nearly half of respondents, followed by the booming energy sector. These, along with the construction and consumer sectors, are expected to generate the highest premiums for deals.
Additional survey results:
High returns: The majority of respondents plan to earn greater than 15% on Brazilian exits, which they expect to surpass typical returns in both developed and other emerging markets
Financing: IPOs and issuing new equity will be the most common methods for financing M&A activity according to nearly half of respondents
Economic Outlook: Over the next 12 months, respondents expect interest rates and inflation to increase and the real to appreciate
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