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Brazil’s economic recovery lifts M&A intentions

Global Capital Confidence Barometer | Brazil highlights | 18th edition

Brazil’s economic recovery lifts deal intentions as companies look to expand into new geographies and business lines

In our latest mergers and acquisitions report, a large majority of Brazilian respondents (84%) see the domestic economy improving, up from 66% in October 2017. While the upcoming presidential election lends a measure of uncertainty, the market is confident that the new president will be compelled to address fiscal issues. Accordingly, almost three-quarters (72%) of executives expect their respective companies to actively pursue acquisitions in the next 12 months — an increase from 6 months ago and well above global M&A intentions (52%).

Rebuilding and expanding after economic turmoil

After years of economic turmoil, Brazilian companies are looking to expand into both new markets and new sectors. The vast majority see both the global (91%) and local (80%) M&A markets improving, and 70% expect both their M&A pipelines and deal completions to increase. At the same time, 85% expect competition for assets to increase in the next 12 months, with 79% saying the competition will come from private equity. Indeed, the return of PE as a major acquirer is one of the top three M&A themes cited by Brazilian respondents, along with increased cross-border and cross-sector dealmaking. However, regulation and government intervention are seen as the biggest M&A risks, named by 30% of Brazilian executives who are eyeing both other Latin American countries and the United States for investment.

Portfolio transformation still prominent on boardroom agenda

Portfolio transformation continues to top the boardroom agenda, with more than half (56%) citing it as their most prominent topic over the next six months. Virtually all respondents (98%) say they review their portfolios at least annually or more frequently, and nearly a third (30%) say the frequency of reviews has increased in the past three years. Artificial intelligence and robotic process automation were named by nearly two-thirds of Brazilian respondents as their boards’ top tech focus.

Emphasis on government infrastructure spending

One especially interesting finding among Brazilian executives is the emphasis on government infrastructure spending: 60% say it is vital to their growth plans. Respondents say new technology and transportation infrastructure are key areas where the government should focus, and nearly three-fourths (73%) expect infrastructure spending to increase in the next 12 months. These findings are further reminders that Brazil is on a path to rebuild itself after political turmoil and a boom-and-bust cycle, and that business leaders feel a return to stability may be at hand.

EY - Felipe Miglioli

Felipe Miglioli

EY-Parthenon | Strategy Services

Ernst & Young Assessoria
Empresarial Ltda.

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