Mergers and Acquisitions activity has peaked in recent months in Brazil thanks to the country’s domestic recovery and abundant global liquidity, but the party may be over for now, according to investors, at least until the unpredictable October elections.
“We are going to have a difficult time until we have a final electoral outcome,” Marcelo Bacci, CFO of Suzano, told LatinFinance at its 16th Brazil Finance and Investment Summit in Sao Paulo. “There is going to be a lot of wait and see, and little action in the second half of the year.”
Bacci’s remarks were echoed by Oscar Decotelli, CEO of DXA Investments. “It is going to grind to a halt in the second half of the year, with the return of volatility,” he said.
Consolidation is still expected in education and health, though, following two IPOs – from Hapvida and Intermedica – since the beginning of the year in those industries. But these are exceptions.
“There is a great deal of uncertainty ahead of us, especially for those companies with a domestic focus,” said Bacci. “These companies that are globally competitive will remain attractive in spite of political uncertainties.”
But this may only be a pause.
“Depending on the electoral results, there may be a boom. I am moderately optimistic,” said Claudio Pitchon, Latam head of natural resources at Mizuho.
“If the result of the elections is at the very least acceptable, activity will bounce back quickly afterwards,” the Suzano CFO said.
Suzano announced a $9.2bn deal in March when it acquired the fellow Brazilian pulp company Fibria.
“We are going to proceed with the take out of the debt we raised at the time, which includes a bridge financing of $6.9bn over three years. We are preparing to extend the maturity of this debt on the capital markets. And then we will focus on cash generation and deleveraging,” said Bacci.