M&As in Brazil Expected to Reach Record Levels in 2024

After falling last year, the number of M&A operations in Brazil is expected to recover in 2024.

Consulting firm Kroll registered 1,400 transactions last year, compared to 1,543 in 2022.

“In 2024, we’ll see the return of a record volume of M&A operations, to around 1,600, as we had in 2021. This is because I expect the return of appetite from foreign investors amid a reduction in interest rates in Brazil and due to less political noise,” Alexandre Pierantoni, the head of Kroll’s corporate finance and M&A area, told BNamericas.

President Luiz Inácio Lula da Silva returned to the presidency in January 2023, narrowly defeating Jair Bolsonaro in October 2022. The transition of power led market players to postpone investment decisions until the government’s plans became clearer.

In addition, M&As and the capital market were impacted by a high base rate of 13.75%. The central bank started a reduction cycle only in August as inflation fell, with the benchmark Selic currently at 11.75% and further reductions expected.

“The positive impacts of the Selic reduction will still materialize, especially when we reach a single-digit level, closer to 9%. I believe that from the second half of the year we will see signs of the return of IPOs, which will also help to provide traction to M&A movements,” said Pierantoni.

The financial and technology sectors will remain the most significant ones in terms of transactions, followed by energy and water.

“São Paulo state is expected to complete the privatization of water utility Sabesp this year, which in itself is a major operation. Furthermore, the completion of this operation could attract even more investor interest to companies in the sector, including to companies that are not yet listed,” added Pierantoni.

Recently, Sabesp hired banks to handle part of the privatization, which is envisaged as a share offering planned for this half. The state owns 50.3% and wants to keep 15-30%. The rest of the shares are listed in Brazil and the US.

Sabesp is one of the world’s biggest firms in the sector, providing potable water to 28.7mn people and sewage services to 25.5mn.

Via BNamericas.

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