M&A Activity in Brazil at Pre-Crisis Levels

Mergers and acquisitions activity in Brazil shows no signs of a slowdown resulting from current economic crises in other countries. A recent study by PwC Brazil shows that 483 M&A deals were announced in the first eight months of the year, in line with 2010 levels and pre-2008 levels.

In 2007, 722 deals were announced, but deal volume dropped off in 2008 and 2009 following the global economic crisis. M&A activity picked back up in 2010 during Brazil’s economic boom, closing the year with a record 797 deals announced. This year looks like it will be another good year for M&A, despite higher inflation, less GDP growth and another global economic crisis looming.

According to PwC, activity between January and August is at about the same levels of 2007. During the same period of 2010 – Brazil’s record deal year – 515 deals were announced. Mergers and acquisitions slowed down earlier this year but have picked back up in the last three months. Brazil is now averaging 61 announced transactions per month for the year.

Although M&A activity is being driven by domestic deals, foreign investors are still seeking out Brazil because of strong medium and long-term growth perspectives, according to PwC.

IT is the sector with the greatest volume of deals, although there is activity across various sectors. IT deals represented 11% of the total for the first eight months of the year. The food and chemicals sectors each represented about 9% of deals, followed by the financial sector at 8%, and retail and services at 6% each. Mining and construction together represented another 9% of total deals.

If this level of activity continues, Brazil could close the year at 2007 levels, or around 230 deals announced. The test will be to see how the M&A market reacts to September’s market rout and currency devaluation.