Digital and technology are top of the agenda as Brazilian dealmakers consider M&A to reimagine businesses.
ince we last surveyed Brazilian companies for our M&A report, respondents say they are seeing some signs of economic recovery. According to the latest edition of the EY Global Capital Confidence Barometer, 82% are saying the local economy is growing, up from 56% a year ago. This positive sentiment is underpinned by improvements across a range of domestic macroeconomic indicators, with 88% feeling positive about corporate earnings (versus 50% in October 2018), credit availability (81% versus 59% in October 2018) and short-term market stability (80% versus 57% in October 2018).
This increase in confidence may, in part, be attributed to the structural reforms that the new Government under President Bolsonaro is either in the process of implementing or is discussing. The recently enacted social security reforms, for example, are expected to have a positive long-term impact on the financial well-being of the country. Similarly, tax reforms, which the Government plans to have in place for next year, are expected to simplify some of the current taxation complexity and improve efficiencies within the system. Additional reforms, such as the Government’s privatization agenda, may also yield positive returns in the medium term. As a result, 79% of Brazilian companies expect revenues to increase in the next 12 months; 76% expect profit margins to improve within the same time frame.