Brazilian market momentum leads to increased PE activity

Private equity firms have shown increased activity in the Brazilian M&A market, according to a study by PricewaterhouseCoopers.

The development of the Brazilian economy has led to increased private equity activity in the Brazilian M&A market.

M&A activity rose 25 percent from 2006 to 2007 in Brazil, with an increasing share attributed to private equity, according to a recent PricewaterhouseCoopers (PwC) study. Of the 718 M&A transactions publicly disclosed in 2007, 110 or 15.3 percent involved private equity firms, up from 11.2 percent in 2006 and 6.7 percent in 2005. This percentage continues to approach the approximately one-third of deals in which private equity participates in the US and Europe.

Brazil’s share of global M&A activity by number of deals also increased by 10 percent in 2007, according to information provider Thomson.

“A few processes are happening in the Brazilian economy,” said PwC partner Alexandre Pierantoni discussing the PwC study. Stabilisation of the economy, an “investment grade perspective”, and more developed and liquid capital markets are among the processes pointed to by Pierantoni. “Together with China and India, Brazil is strengthening its position as an investment alternative.”

The February 2008 study, titled “Private Equity in Brazil” was published by PwC’s Brazilian corporate finance group.

 “Private equity funds are seeing the momentum,” said Pierantoni. Bolt-on or buy-and-build strategies have become frequent in the Brazilian market. Of the 110 transactions involving private equity firms, firms were directly involved in 53 with 57 being made through private equity portfolio companies.

Private equity platforms buoying M&A activity in Brazil include Patria’s healthcare platform DASA, Patria’s educational platform Anhanguera Educacional, Monte Cristalina’s consumer products company Hypermarcas and GP Investimentos’ shopping center company BR Malls.
“The momentum is continuing with the same activity [in 2008],” said Pierantoni. Brazil has seen a siginificant uptick in interest as a destination for private equity in recent years. More than $4 billion was committed to private equity firms for investment in Brazil in 2007 and global private equity giants such as The Blackstone Group and Carlyle Group have recently commenced operations in Brazil.

PwC provides industry-focused assurance, tax and advisory services in 150 countries.