M&A: Brazilian markets get super-heated

Power and utilities; commodities; food, beverage and tobacco; information technology; and general retail will lead the wave of M&As over the next couple of years in Brazil. The first two categories are likely to see a limited number of big deals whereas the last three should produce a large number of smaller deals, market watchers agree. The current wave of M&A has a number of drivers. Key among them are changes in legislation; a fear that in this dog-eat-dog environment it’s buy or be bought; and a move to rationalise through asset swaps. Most of all, this wave of M&A activity reflects the sunniest loan and capital markets pictures in years, enabling Brazilian companies to dust off long cherished acquisition plans and find the funding to get them done.

Investment bankers reflect that buoyancy. “Our pipeline is stronger now than it was going into 2006. We are working on 30 deals although probably not all will come to fruition. We announced 17 deals in 2006,” says Ricardo Lacerda, Head of Citigroup Brazil’s Investment Banking. Eduardo Centola, co-head of Latin investment banking at Goldman Sachs, says that the firm has a pipeline of large deals and is confident on prospects for 2007. One firm is so confident that it’s setting up a dedicated division. Alexandre Bettamio, co-head of investment banking at UBS Pactual, says the bank is setting up a group dedicated to M&A, to be headed by Roderick Greenlees. He will have a team of three or four and the group will actively go out to source clients.

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