Joint ventures are becoming more popular, rising as a preferred route for divestment from 17% to 31% of respondents.
Raising capital
The lack of interest in M&A may also derive from lack of ammunition. Fewer companies now (23% vs. 31% in April) say they will have financing available for a major acquisition and/or capital projects within the six months.
Only 23% think they will have the financing available within 6 to 12 months, compared to 46% in the spring.
Overall, 62% say that credit capital conditions have improved for their company in the last six months – a positive number, but not as high as the 77% who reported improvement in April.
Cash remains the most popular source of capital for deal financing. A total of 57% of respondents see cash as the biggest source of deal financing over the next 12 months. Bank loans are also of interest (40%), but shares and equity are of much less interest (29%) and debt is scarcely a viable option (11%).
For divestments, third-party sales are now less preferred than they were in April (51% in April compared to 30% in October), as are IPOs (23% in April compared to 13% in October). Joint ventures are becoming more popular, however, rising as a preferred route for divestment from 17% to 31% of respondents.
What was your main source of deal fi nancing in the past 12 months, and what do you expect to be the likely source in the next 12 months?
Cash
Bank loans
Shares and equity
Debt
Investing capital
At the moment, Brazilian executives identify the revenue growth rate as the top value driver for valuation. Whereas in April, more investors were also looking for stories about expanding into new customer markets, investing in new products or services, or maintaining market share, today they are asking companies to "show me the money."
In fact, in the present climate, nothing else matters nearly as much as cash. While revenue growth is roughly as important as it was in April (78% of respondents say it is important compared to 80% in April), their rating of the importance of the other major business drivers has shrunk by 20% or more.
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