M&A: PROSPECTS FOR 2018

The segment of mergers and acquisitions (M&A) is recovering a lot in 2018. Twelve months after the worst economic crisis in recent Brazilian history, the Brazilian economy has been showing successive signs of reheating. Inflation closed 2017 at 2.95%, below the government's target, and GDP grew by 1.0%, after 2 consecutive years of decline. Growth of more than 2.5% is also expected for 2018. These indicators, together with a higher level of confidence among entrepreneurs, have reflected the volume of Mergers and Acquisitions (M&A) in the country. While in 2017 there were 643* transactions for the purchase, sale and merger of companies, in the first three months of 2018 alone, 153 transactions have already been completed. The Information Technology, Services, Financial and Chemical sectors were the highlights so far, representing more than 52% of the transactions in the period. As in recent years, the Southeast region concentrated the highest volume of business, approximately 73%. National investors have played a fundamental role in this movement, accounting for 62% of the total business carried out, in line with what has been observed in the last three years. Noteworthy, however, is the performance of American, German and French investors, who were responsible for 49% of Mergers and Acquisitions carried out in Brazil with foreign capital. The low participation of foreign investors, who historically concentrated the largest volume of transactions, is still a reflection of the lack of confidence in the political and economic management of the country. The prospects, however, are very positive. The adoption of more austere economic measures, associated with the reduction of interest rates to the lowest level ever seen in the country, tend to bring confidence to investors and consumers. Political uncertainties will be significantly reduced by the end of the year, with the election of a new democratically elected president. Finally, the new Brazilian economic reality, with low interest rates and controlled inflation, induces investors to allocate part of their capital to businesses linked to the real economy, in the search for higher levels of profitability, once offered by government bonds. After a long period of low activity, the current moment is one of movement.

* According to data from PwC

Article written by Matheus Rigueira -Associate of FC Partners

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