50% of Brazilian executives see an acquisition ahead in the next one or two years, just slightly lower than the global average of 54% or the US average of 56%.
Brazilians are less optimistic now than in April that the global economic recovery will happen in the next 12 months.
Forty-seven percent of our respondents now believe that the recovery will happen within the next 12 months, compared to 60% in April.
Brazilians, however, remain significantly more optimistic about the prospects of global recovery than executives in the US or the global average. Worldwide, only 34% of executives surveyed now see the prospect of recovery within the next 12 months, compared with 40% in April.
Brazilians remain more optimistic than American executives as well: In the US, only 29% now see a recovery in the next 12 months, compared with 46% in April.
Brazilian respondents also remain more confident about their own economy than the global economy. Sixty-nine percent of Brazilians are now optimistic about the domestic economy’s prospects, compared with 67% worldwide.
Yet as bullish as the Brazilians seem, they are much less sanguine than the other BRIC (Brazil, Russia, India and China) countries, where there is now near unanimity about the prospects for strong growth.
In India, 92% of respondents are confident about the next 12 months, compared to 91% in April.
Russia had a sharp turnaround, rising from 47% to 89%, despite the failure of the wheat crop and the summer’s devastating heat wave. China remains strong as well, having risen from 79% in April to 82% today.
Capital markets
Nearly two-thirds of Brazilian executives, 62%, say that credit and capital conditions have improved in the last six months, a number in line with the global average (58%) but significantly stronger than what executives now report in the US.
Less than half (47%) of American executives polled say credit and capital conditions have improved in the last six months.
One reason may be that Brazilian companies also have somewhat stronger balance sheets. Only 37% of Brazilian executives say their companies are under pressure to refinance loans or other debt, less than either the global average (48%) or the US average (43%).
Optimism by country April 2010 to October 2010
Yellow highlight indicates where confidence has improved by more than 5%
Mergers and acquisitions outlook
In Brazil, as in much of the world, the enthusiasm for mergers and acquisitions (M&A) has grown more tepid since April. In October, only 18% of executives were actively looking to grow through M&A over the next six months, down from 34% in April.
Finding capital for a merger or an acquisition was the third most important capital allocation priority in October, down from number two in April.
Higher priorities are now organic growth (77%) and research and development (40%). Among global executives, M&A enthusiasm has fallen from 38% in April to 29%. In the US, plans to grow through M&A over the next six months have fallen from 39% to 26%.
Why so little interest? A full 68% of the Brazilians cite investor caution and 37% see lack of opportunity as the prime reason the checkbooks remain shut.
In fact, Brazilian companies appear to be among the least likely companies in the world to execute a merger in the next six months. Sixty-five percent say they are unlikely to execute an acquisition in the next six months, a number similar to the 61% of Russians and 60% of Chinese who have no acquisition plans.
Further out, Brazilians’ merger optimism is slightly greater. Overall, 50% of Brazilian executives see an acquisition ahead in the next one or two years, just slightly lower than the global average of 54% or the US average of 56%.
Although still a minority preference, interest in cross-border emerging market mergers seems to be growing sharply.
Outlook is positive for acquisitions
Thirty-eight percent of Brazilian executives say they plan to make an emerging market acquisition in the next 12 months, a sharp upward tick from 9% in 2009, but a similar jump as that among global respondents (up to 35% from 26% in 2009) or US executives (up to 35% from 26% in 2009).
At the same time, nearly one-third of Brazilians (31%) see a joint venture or strategic alliance ahead, about the same as the global average (33%) but lower than the US average (40%).
Perhaps the biggest reason for Brazilian executives’ relative lack of enthusiasm for M&A is the prospect of continued strong growth in their own companies. In Brazil, 55% of companies plan to focus on organic growth over the next six months, compared to 34% in April.
The Brazilian enthusiasm for home-grown growth is higher than the global average (46%) or the US average (42%), although both sets of respondents have also experienced a sharp increase in enthusiasm for organic growth.
In April, only 38 % of global respondents and 35% of US respondents were pursuing a growth strategy.
How likely is your company to execute transactions in the following time periods?
a) Likely or highly likely to make acquisitions
b) Likely or highly likely to make divestments
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