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Brazil M&A trends April 2015 2015 Q1 Includes focus on French-Brazilian deals
Brazil M&A trends
April 2015
2015 Q1Includes focus on French-Brazilian deals
PwCApril 2015
M&A activity in Brazil has been on the rise, reaching879 publicly announced deals in 2014, while 2015 Q1saw a stabilization of the deal flow
1Brazil M&A trends •
Section 1 – Brazil M&A trends
Source: PwC.Based on publically announced transactions, including all M&A activity (i.e. majority and minority stake acquisitions, mergers,disposals and other agreements). Includes transactions by Brazilian companies outside Brazil.
Publicly announced transactions in Brazil • The Brazilian M&A market showed asteady increase since the early 2000s,driven by:
- Economic growth
- Development of private equity
- Increasing interest from foreignbuyers
- Improved access to credit
• In 2014, despite uncertainty inducedby the elections, as well as the soccerworld cup, M&A activity continuedstrong, demonstrating the long-termattractiveness perceived by themarket.
• 2015 Q1 showed a stabilization at ahigh level, potentially reflecting theeconomic slowdown expected for2015.
191(Q1)
PwCApril 2015
Brazil continues to be an attractive destination forforeign investors with a long-term strategy
2Brazil M&A trends •
Section 1 – Brazil M&A trends
Source: PwC.Based on publicly announced transactions, including acquisitions and minority stake investments only (i.e. does not includemergers, disposals and other transactions) of targets in Brazil
National and international majority and minority stake investments in Brazil
• 44% of acquisitions in Brazil in 2014were performed by foreign buyers,increasing to 51% in 2015 Q1.
• With a large and diverse economy,Brazil is the 7th largest economy in theworld and offers a unique opportunityfor foreign investors with a long-termstrategy, despite current economicuncertainties.
• Key investment considerations include:
- Large potential consumer market
- Emerging middle class
- Wide range of natural resources
- Need for investment in infrastructure
- Eligibility to most of the availableincentives (including tax incentives)
- Robust performance of IPOs andM&A markets in the recent years
- Convergence of local accounting andauditing standards (BRGAAP) toInternational Financial ReportingStandards (IFRS)
x 85x 82
PwCApril 2015
French acquisitions in Brazil have surged in the last years,representing just below 10% of foreign investments
3Brazil M&A trends •
Section 1 – Brazil M&A trends
• While some French companies havebeen present in Brazil for more than acentury or decades, others have investedmore recently.
• Acquisitions in Brazil by Frenchcompanies have more than doubledsince the early 2000s, reaching around20 deals in recent years.
• In 2014 and 2015 Q1, the main dealsconfirm the general interest by foreigninvestors for Brazil:
- Natural resources
- Infrastructure requirements
- Large consumer market
Source (graph and table): PwC and Zephyr
0
Selection of French-Brazilian acquisitions 2014
Montana Industria de Maquinas Ltda Agricultural machinery manufacturer Kuhn Groupe SA Acquisition 100%
Bagasse cogeneration plant in the state
of São PauloBagasse cogeneration plant Albioma SA Acquisition 100%
Reason Tecnologia SAMeasurement and substation automation network
software developerAlstom Grid SAS Acquisition 100%
Usina Termeletrica Norte Fluminense
SAThermoelectric power production services Electricite de France SA
Acquisition increased
from 90% to 100%
Niely do Brasil Industrial LtdaBody products manufacturer, Hair products
manufacturerL'Oreal SA Acquisition
AdtradeOnline advertising services, Online computer
advertising serviceseSearchvision SA Acquisition 100%
Jasmine Comercio de Produtos
Alimenticios LtdaHealthy and organic food products manufacturer Nutrition & Sante SAS Acquisition 100%
Total Alimentos SA Cat and dog food manufcaturer InVivo NSA SA Acquisition 100%
Lenc Laboratorio de Engenharia e
Consultoria LtdaEngineering consultancy services Egis SA Acquisition 100%
Sistema PRI Engenharia LtdaConstruction planning, technical studies and
technical assistance services, Construction projectBureau Veritas SA Acquisition 100%
PwCApril 2015
The IT industry dominates the M&A market in Brazil,but other sectors also offer opportunities
4Brazil M&A trends •
Section 1 – Brazil M&A trends
• In 2015 Q1 as in 2014, the IT industryled the M&A league tables, reflectingthe strong growth in Brazil ofsub-sectors such as e-commerce andsoftware.
• The “General services” industryincluded deals in 2015 Q1 in sectorssuch as marketing services,outsourcing and engineering services.
• Deals in the Financial Services industryin 2015 Q1 included for examplepayment solutions, loyalty programsand micro finance.
• Public services deals included targetsfor example in public works(engineering).
• Food & Beverages deals targeted forexample coffee and chocolatecompanies.
• Other sectors which offer opportunitiesgoing forward include for example thehealth industry, as Brazil recentlyallowed foreign companies to invest in(and even take control of) Brazilianhospitals, clinics and laboratories.
Source: PwC
PwCApril 2015
Private Equity activity has developed significantly inBrazil
5Brazil M&A trends •
Section 1 – Brazil M&A trends
• Starting from a small presence 10 yearsago, the private equity industry hasundergone significant development overthe last few years in Brazil, with PE housesbeing perceived as a credible partner tocreate value for shareholders.
• Key drivers of PE growth in Brazil include:- increasing exit opportunities- wide range of highly fragmented
industries requiring consolidation- improved access to credit- increased acceptance of PE houses as
business partners- arrival of foreign PE houses
• Until now, PE deals are mainlyconcentrated in small and mid-sizedbusinesses, often family-owned.
• Competition in the Brazilian PE marketseems to be increasing, wheredifferentiation translates into sectorexpertise as means to add value toportfolio companies. Main sectors intowhich PE houses invest include Consumer& Retail, Business Services, Industrial andTechnology Media & Telecom (TMT).
Private Equity participation in M&A(% of total deals per year)
Source: PwC
Source: PwC - Insead
PE deals by industry 2011-2014(% of total deals per year)
PwCApril 2015
PwC CapabilitiesAppendix 1
6Brazil M&A trends •
PwCApril 2015
PwC Brazil has the largest deals team in the countrywith >400 dedicated professionals
7Brazil M&A trends •
Appendix 1 – PwC Capabilities
Salvador
Belo Horizonte
Brasília
Rio de Janeiro
São Paulo (x2)
Curitiba
Porto Alegre
M&A Headcount Headcount byArea
Diligence:Finance
Tax
IT
Commercial (*)
124
122
15
40
CorporateFinance9 Partners11Directors38 Managers55 Consultants
113
Sustainability 12
Integration (*) 40
Strategy (*) 40
Total 418(*) Out of Deals Department
PwCApril 2015
In France, our Brazilian desk contributes a strongexperience with French-Brazilian deals
• PwC France has a desk dedicated to Brazil, which was established to be the point of contact for Frenchcompanies entering or expanding in Brazil and for Brazilian companies investing in France. Focused onassisting clients in cross border investments, this desk has a coordination function, accessing ournetwork of professionals in both countries to provide the specific support to our clients with their investment,operational and strategic needs.
• The FRBBG is a multi-disciplinary team that assists clients in understanding the local realities, liaisingwith PwC teams in the other country and aiming at helping clients to succeed in their internationalexpansion ambitions beyond the deal, into integration, operational, tax, strategy and compliance needs. Tobest assist our French clients in their development in Brazil we offer a wide experience in the fields of:
- Mergers and acquisitions (due diligence services, corporate finance, amongst others)- Tax & legal- Management advisory- Finance planning- Assurance
France-Brazil Business Group (FRBBG)
8Brazil M&A trends •
Appendix 1 – PwC Capabilities
PwCApril 2015
Contacts
Manoël de Goeij
Partner, Corporate Finance
[email protected] | +33 (1) 5657 6094
9Brazil M&A trends •
Appendix 1 – PwC Capabilities
Alessandro Ribeiro
Partner, Corporate Finance
[email protected] | +55 (11) 3674 3950
PwC France Brazil Business Group PwC Brazil
Katia Carow
Partner, Transaction Services
[email protected] | +33 (1) 5657 7625
Humberto Tognelli
Partner, Transaction Services
[email protected] | +55 (11) 3674 3855
