Information technology and the internet dominated mergers and acquisitions in 2021, with 675 deals between January and September. Photo: Unsplash
Seeing opportunities in the market, even in a scenario of growing uncertainty, companies will buy: 2021 ends with a record number of mergers and acquisitions (M&A).
Data from the consultancy firm KPMG show that in the first three quarters of the year, 1,361 transactions were completed, or 21.8% more than for the whole of last year. The values are the highest in the historical series that began in 2003.
“If in 2020, with a crisis situation, the emphasis was on the survival of companies, in 2021 they are more aware of the scenario and have resumed their plans”, explains Luiz Motta, partner responsible for mergers and acquisitions at KPMG.
The predominance is operations involving Brazilian companies, with 65% of the total. And the cutting edge sectors are information technology and the Internet. There were 675 operations between January and September. “Everything related to digital transformation has driven this movement,” he emphasizes.
He stresses that this type of corporate transaction is the natural way out of the crisis, because it represents a “paradigm break”.
Low “organic” growth leads companies to try to grow with acquisitions
An international survey by Mercer shows that most companies bet on mergers and acquisitions to beat their competition and pave the way for evolution. The survey indicates that this trend will intensify over the next ten years.
For 56.7% of executives surveyed, the appetite for this type of operation in the next 24 months will be equal to the peak recorded before the start of the pandemic. The study points out that the low “organic” growth experienced by companies in different sectors in recent years is leading them to seek expansion through acquisitions.
“M&A operations were on the road to recovery when the Covid-19 pandemic emerged last year. Many companies have suspended their activities because they did not know what the consequences of the crisis would be. Today, with the growth of online work and countries obtaining vaccines, we have seen a new development, ”said Renata Andrade Alves, local head of mergers and acquisitions at Mercer in Brazil.
According to her, there has been an intense movement of foreign investors in Brazil in recent months. “This is a reflection of several factors, such as falling domestic asset prices, but what catches our attention is the growth potential of mergers and acquisitions in the country.”
Health and energy also arouse interest
Healthcare is another segment that has gained in relevance, according to Denis Morante, of Fortezza Partners, an investment boutique specializing in this type of operation.
Macroeconomic issues are driving this movement: “Brazil is a large country, with an aging population and deficiencies in the quality of public health care,” explains Morante. According to KPMG, there were 46 operations in this sector in the first half of the year. .
Renata, of Mercer, points out that another growing sector is energy, driven by the privatization of public assets. “Large conglomerates are involved in the operations. And there is great interest in wind and solar power.
Mergers and Acquisitions Expectations in 2022
Despite the trend for much weaker economic growth in 2022, with expectations of more instability due to deteriorating economic conditions and the election campaign, mergers and acquisitions specialists consulted by Gazeta do Povo do not foresee a sharp drop in the number of operations. “M&A investors prefer longer durations,” says Morante of Fortezza Partners.
They point to a less vigorous scenario, marked by a reduction in international liquidity and challenges in the domestic environment. Closer negotiations are expected for next year, especially between larger companies, which often need to raise funds to complete the deal. “For small businesses it should be less difficult because they work more with their own resources,” says Motta of KPMG.
Regarding foreign investors, Morante believes he will remain cautious. A Dealogic study for the journal “Valor,” published earlier this month, points to a sharp decline in foreign participation during the pandemic. Their share fell from 60.6% of the total transaction value in 2019 to 21.7% last year, and 22.5% in 2021, according to consolidated data as of November 26. “The political question is a factor that influences a lot.
Another reason for this caution, according to Professor Rodrigo Leite, of the Institute of Graduate Studies and Research in Administration at the Federal University of Rio de Janeiro (Coppad / UFRJ), is the current scenario of the Brazilian market.
“With stagnant GDP and the dollar appreciating against the real, selling to Brazilians is not scalable. It becomes more difficult to reach the breakeven point, ”explains Leite, referring to the moment when the balance between income and expenses is reached.