The Brazilian M&A market showed a reduction in volume and number of transactions in 2022, compared to 2021. However, this year confirmed the trend of the new level of transactions in the country that continues to evolve strongly, compared to 2019 and 2020.
In 2021 there were just over 2,700 M&A operations, while in 2022 surveys project that the total will reach 2,200, indicating a potential year-over-year drop of 18.5%. However, it is important to put this figure in perspective, as noted by Philippe Mari, Managing Partner at Acorn:
“Brazil surpassed the 2,500 M&A mark for the first time in 2021, coming from an average of 1,500 annual operations. Although 2022 shows a reduction in M&A activity, the year confirms the positive trend.”
Number of M&A operations in Brazil in the last 12 months
Some factors made 2022 have a relatively more timid performance. Philippe comments that the electoral period, combined with the uncertainties of the new government and also a closed capital market, made investors take a more restrained view in the second half and especially with some investors preferring to wait for the beginning of 2023 to have a better view of the political and economic scenario, causing some operations to slip into the following year.
When we see a number of pent-up operations at the end of 2022 and a year of 2023 with a potentially open capital market, allowing companies to capitalize, we can expect another positive year, also supported by the fact that foreign investors, especially in the technology sector, continue with a strong level of interest in Brazil.
“We should once again see the leadership of the technology sector in 2023, but with an evolution of some more defensive sectors such as agribusiness, auto parts, and healthcare. In addition, although the local investor should wait for the government’s first actions to step on the accelerator again, foreigners have record levels of appetite for Brazil, which is expected to continue next year.”
The profile of transactions has evolved in the domestic market, both from the point of view of the type of asset and from the point of view of the profile of investors, certainly contributing to the maturity of the market. We can verify, according to data published by TTR (Transactional Track Record), that the average value of M&A transactions has been decreasing over the past few years, indicating that more and more small and medium-sized companies adopt M&As in their growth and development strategies and that more and more entrepreneurs see M&A as an alternative to succession.
Transactions by sector in the last 12 months
As we move toward 2023, the scenario will continue to take shape, potentially reducing economic uncertainties and contributing to the opening of the capital market. With this, local investors will return to a higher level of activity, combined with the appetite of the foreign investor, confirming the positive trend for 2023.
Here’s to 2023 and good business!