- From January to May 2021, M&A activity in Latin America increased by 43.6% when compared to the same period in 2020, reaching 293 deals;
- Brazil had a record-breaking volume of public offerings in 2020 compared to the last nine years, reaching BRL 117.9 billion.
July wasn’t so crowded as June in terms of investments in Brazilian companies. Brazil had 60 funding rounds, with a total volume of $852 million, and 25 M&As. In June, Brazilian startups raised nearly $4 billion through 80 rounds, according to the Brazilian innovation platform Sling Hub.
Sling Hub’s number is different from that of Distrito ($484 million) because it counts VTEX‘s IPO as fundraising, and also counts debt and equity crowdfunding in its estimative. According to Sling Hub, Brazil‘s most active investors in July were monashees (it invested in four startups), followed by Domo Invest (three startups), and ONEVC (also three startups).
The estimate includes deals performed by venture capital and private equity funds, as well as family offices and, more recently, corporate venture capital investors. At the same time, IPO and M&A volumes in 2021 are already at record levels in Brazil, says a recently released survey by the consulting firm Duff & Phelps.
January to May 2021, M&A activity in Latin America increased by 43.6% when compared to the same period in 2020, reaching 293 deals, according to Duff & Phelps.
Brazil leads the activity volume and value, followed by Mexico and Chile. It is a 71.8% increase in transaction volume, with 213 deals and a 307.5% increase in value, reaching $33.4 billion, according to Acuris Mergermarket database gathered by Duff & Phelps’ survey.
Duff & Phelps attributed this increase to the high liquidity provided by the central banks and a low-interest rate scenario and, moreover, driven by improving domestic macroeconomic scenario and opportunistic moves from players less affected by the pandemic (with a stronger cash position or good access to funding). Based on wider criteria, incorporating all transactions announced in Brazil between January and May 2021, the country registered 693 deals.
IPOs and follow-ons raised more than BRL 65.5 billion ($12.1 billion) until May 2021, according to the report.
As of May 2021, Brazilian stock exchange companies had a total market capitalization of over $1.1 trillion, and Brazil has a recording 3.74 million individual investors in Brazil’s capital markets, a 17% increase over 2020.
Markets’ activity in Brazil heats up
Brazil had a record-breaking volume of public offerings in 2020 compared to the last nine years, reaching BRL 117.9 billion, behind 2010 only. Why did that happen? According to Duff & Phelps, due to internal favorable factors, such as basic interest rates low levels (an unparalleled event in the country’s history contributed to investors looking for assets with higher returns), the potential of internal consumption (in part backed by government emergency aids from the pandemic) and favorable expectation for structural reforms.
Another record-breaking volume of stock offerings is expected for 2021, with an estimate of more than 100 companies going public according to XP Investimentos, significantly surpassing 2020 (31 IPOs) and previous years. In the first five months of 2021, 26 companies went public in Brazil, and, through May 31st, another 36 companies have already filed for IPO.
Through May 2021, 25 Brazilian companies carried out IPOs in the Brazilian stock exchange (B3), and one of them, Vinci Partners (financial services), went public at Nasdaq, recalls Duff & Phelps.
Furthermore, 13 companies launched follow-on offerings, adding $5.4 billion in offer volume for the period (out of $12.3 billion counting the IPOs). The largest IPOs in terms of gross proceeds were CSN Mineração (mining), Caixa Seguridade (insurance), and Modalmais (banking/investments). Also noteworthy are financial sponsor-backed IPOs such and GetNinjas, PetroRecôncavo, Grupo GPS, Eletromídia, Westwing, and Espaço laser.
Equities’ activity to reach all-time high in 2021
Equities’ activity is expected to reach new historical highs in terms of offerings in 2021, says Duff & Phelps. Based on market estimates, companies offering memoranda and investment banks, IPOs and follow-ons may reach $35 billion (BRL 170 billion) in 2021.
Until May 31, there were 334 Brazilian companies listed on B3. With recent new listings, the exchange experienced considerable sector diversification. The consumer durables and apparel sector account for the highest number of companies (43 listed companies) and 2.4% of the total market capitalization. Materials (28 listed companies) account for 18.1% of the total market capitalization followed by banks (19 listed companies), accounting for 17.3%.
Of the 94 Brazilian-listed companies on major U.S. exchanges as of May 31, 2021, approximately three-fifths of them trade over-the-counter (OTC), nearly one-third on the NYSE, and eight companies on Nasdaq. There is large diversification in terms of sectors for U.S.-listed Brazilian companies, with the banking sector accounting for 19.8% of the total market capitalization.
What comes next? Brazil’s privatization agenda
Looking ahead, there is a constant and considerable movement towards privatization, stronger control over government spending, and fiscal austerity. Brazil has a privatization program called Programa de Parceria de Investimentos (PPI) that foresees the sale of government-owned companies in various infrastructure-related sectors such as ports, airports, telecom, energy, roads, railroads, finance and water/sewage, oil and gas, mining, and Brazil‘s Postal Service Correios.