May/June 2009 / Features
Bright Prospects for M&A in Brazil
This year will be difficult for global mergers and acquisitions. Analysts agree that deal flow will only return when liquidity improves. Bargain hunters are searching for good deals in emerging countries, like Brazil, that became undervalued as a result of currency devaluation.
Benefitting from the commodity boom that began in 2007 and lasted well into 2008, Brazil experienced unprecedented growth. Despite lingering social problems and inequalities, a new middle class surfaced. As a result Brazil remained attractive in 2008 despite the economic crisis. The country was upgraded to investment grade in the second quarter. Private equity and institutional investors that had restrictions preventing investment in non-investment grade countries saw an opportunity, and investments in Brazil increased significantly.
A slowdown is inevitable, but the Central Bank of Brazil projects a total foreign direct investment of US$30 billion in 2009. Many analysts call that too optimistic due to the worldwide lack of credit. Several large projects announced in 2008 were either cancelled or postponed. However, infrastructure investment is receiving a big push from the government through its growth acceleration program. Energy and infrastructure are two sectors where growth can be expected to continue despite the international downturn. The fundamentals of Brazil’s economy remain strong.
Marcio Baptista is the managing partner of the New York City office of Brazil-based Tozzini Freire Advogados, the largest law firm in Latin America. He specializes in mergers and acquisitions, insurance and reinsurance, transnational contracts and joint ventures for U.S., European, Asian and South American clients. Contact him at mbaptista@tozzinifreire.com.
