The share of foreign capital in mergers and acquisitions in Brazil has increased in the first nine months of the year, according to a bulletin by the Brazilian Association of Financial and Capital Market Organizations (Anbima). Acquisitions of Brazilian companies by foreign ones totaled 47.6 billion Brazilian reais (US$ 27.5 billion) from January to September.
They accounted for 32.9% of all mergers and acquisitions in the country. During the same period of 2009, the figure was 9 billion reais (US$ 5.2 billion), equivalent to a 9% share.
According to the chairman of the Anbima’s Mergers and Acquisitions Subcommittee, Bruno Amaral, the increase is mostly due to the resumption of purchases by the United States and Europe, which held back in their acquisitions early this year, as they waited for their economies to improve.
In terms of financial volume, Latin America accounted for 39.8% of acquisitions of Brazilian companies by foreigners. Asia accounted for 15.2%, Europe for 44.2% and the United States for 0.6%.
In terms of number of operations, foreigners have acquired 24 Brazilian companies up until September this year, a figure equivalent to 25.5% of total acquisitions. In the same period last year, 12 transactions were carried out, or 17.7% of the total. The appreciated dollar has had no effect on acquisitions.
“The exchange rate has a negative influence on acquisitions, making them more expensive to foreigners, but if there are good perspectives regarding the country’s economy, the growth of enterprises, and foreigners can see that clearly, then the exchange rate is not that relevant,” says Amaral.
According to Amaral, in spite of the unfavorable exchange rate, foreigners’ acquisitions are a display of trust in Brazil and a sign that its economy is expected to remain strong over time.
He believes that the United States and Europe have maintained their trend of having a strong share in this type of operation, and highlights the interest of the Asians. “The interest of the Asians is here to stay,” he claims. Over the next few years, the share of Asians in mergers and acquisitions in Brazil, according to him, should be higher than the historical average.
With regard to mergers and acquisitions in Brazil as a whole – including domestic and foreign capital – there has also been an increase from January to September. The financial volume was 61.8% higher than in the same period of last year and has already exceeded the figure for the whole of 2009 by 21.7%.
A total of 94 mergers and acquisitions have taken place in Brazil from January and September, at a volume of 144.8 billion reais (US$ 83.7 billion). Value-wise, this is the highest figure since the first nine months of 2006, and in number of operations it is second only to the figure for January to September 2007.
The telecommunication industry had a strong influence on these figures. The largest operations included the purchase of Portugal Telecom’s share in Brasicel (Vivo) by Telefônica, for 18.2 billion reais (US$ 10.5 billion); the establishment of Latam, with assets from TAM and LAN, totaling 14.4 billion reais (US$ 8.3 billion); the purchase of a stake in Oi by Portugal Telecom, for 9 billion reais (US$ 5.2 billion); and the purchase of Net shares by Embratel for 4.6 billion reais (US$ 2.6 billion).
In terms of financial volume, 30.4% consisted of acquisitions of foreign companies by Brazilian ones, at 44.1 billion reais (US$ 25.4 billion); 15.6% were acquisitions among Brazilian companies; 21.1% consisted of purchases among foreign companies, at 30.5 billion reais (US$ 17.6 billion); and the remainder consisted of acquisitions of Brazilian companies by foreign ones.
There was a large number of operations over 1 billion reais (US$ 578 million). These have accounted for 32% of the total up until September, in number of operations, and 89.4% of the total in financial volume.
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