Brazil’s volume of mergers and acquisitions (M&A) hit a record in the first six months of 2022.
This movement may continue until the end of the year, according to a survey by consultancy PwC.
According to a survey by Bain & Company, M&As may move US$4.7 trillion by December, writes Forbes in its latest report.
If confirmed, it will be the second-best year for trading ever recorded. This estimate is based on the recovery in economic activity in recent months.
However, volatility remains on the radar due to rising interest rates in the United States and Europe, global inflation, and problems in the supply chain that have been exacerbated by the war in Ukraine and other geopolitical tensions.
With such turbulence, it is common for entrepreneurs and executives to be more conservative when negotiating.
However, those interviewed by Bain recalled that the biggest deals are closed during periods of turbulence and tension. The survey reveals that companies that overcome recessions increase their Ebit (earnings before interest and taxes) by 14% in the 13 years following a slowdown.
It is possible to identify great opportunities for mergers and acquisitions as companies worldwide continue to show robust cash flows and balance sheets.
“Therefore, companies looking to grow should review their M&A policies and consider this new landscape, so executives have a clear view of all the potential outcomes,” according to the Bain report.
“Despite the turbulence, these are times when many sectors will be shaped for years to come.”
TECHNOLOGY LEADS M&As
With 807 transactions overall, the sector leading M&As is technology, following a long-term trend. This sector has led the PwC survey for the past ten years.
Next come services in general, with financial and healthcare companies, such as medical services and health plans, standing out.
The education, agribusiness, and food and beverage sectors are also booming.
THE PANORAMA IN BRAZIL
According to PwC, the M&A operations in Brazil continue to be closed mostly between Brazilian companies.
Despite the percentage of 2022 having fallen to 78% compared to 83% in 2021, the national capital continues to represent more than three out of every four reais transacted.
The justification is the knowledge of the local market and the need for strategic movement of Brazilian companies, in addition to the search for operational efficiency and technological solutions.
The international investors who invest the most in Brazil are North American funds and companies. Next are the European investors, focused on sectors such as energy, industrial products, technology, and others.
Following are companies from Asia, mainly looking for commodities, food, services, and technology.
WHY DO COMPANIES DO M&As?
According to PwC, companies do M&A for several reasons.
The main ones are to adopt strategies to generate value, make expansion projects viable, and provide an outlet for sellers.
Besides these reasons, the justifications for a merger or acquisition can be:
- Realization of the partners’ personal investment
- Lack of business succession
- Financial difficulties
- Resolution of corporate disputes
From the buyer’s point of view, the justifications are the elimination of competition, increase in market share, incorporation of new technologies, and increase in the portfolio of products and services, as well as entry into new markets and synergy gains.
With information from Forbes