Amid the persistent ambiguity of the international economic scenario, the volume of M&A transactions in Brazil is expected to rise in 2024 compared to the last year. Coming from a rough couple of years that expressed a relevant downgrade from record numbers of transactions and invested values in 2021, the sector is expected to grow at least 10% in 2024 according to the specialists.
As one of the world’s most significant emerging economies, Brazil attracts a wide range of foreign and domestic investors looking for growth and consolidation opportunities. In recent years, economic and legal measures, such as regulatory and tax reforms, have simplified procedures and improved stability in Brazil to receive both domestic and foreign investments. Not surprisingly, despite the decrease in the volume and aggregated value between 2022 and 2023, Brazil was the leader of Latin America in terms of both turnover and aggregated value of M&A transactions, according to TTR Data, closing 2023 with the total of 2,008 transactions.
These recent changes have addressed some of the main issues that represented challenges for investments in Brazil, such as tax complexity and exchange rates volatility, which directly affect foreign investments. The improved access to financial resources, whether by lower interest rates or the infrastructure debentures announced by the Brazilian government earlier this year (Law 14.801/2024), will also contribute to attracting investments to the country.
Additionally, the continued growth of the Brazilian stocks market and the tax reform approved last year by the Brazilian Government (Law 14.592/2023) favor economic and legal stability, therefore, the level of predictability and security achieved in the market makes it more attractive to foreign investments.
The optimistic view of the M&A market for 2024 is also based on companies’ strategy to rely on M&A transactions to transform their market position, accelerate their growth and increase their operational efficiency. Even in challenging conditions, M&A continues to be one of the main growth strategies for organizations, not only to acquire other companies, but also aiming at the acquisition of assets, and the investment in start-ups, as an opportunity to access new technologies and innovative solutions.
It is precisely because of the nature of the M&A transactions that the trending sectors for M&A in 2024 are (a) technology, especially involving healthcare and Artificial Intelligence (AI), (b) energy transition and the so-called ‘climatechs’; and (c) the agribusiness.
M&A transactions involving AI tend to be an interesting strategy for companies that do not have access to AI technology and do not have the resources to develop it in the short term, especially considering markets in which AI can embody significant advances in the way of doing business and developing disruptive products and solutions.
As for ‘climatechs’, in addition to the urgency of the energy transition and other impacts of climate change, the growing demand for ESG and the consolidation of the carbon market tend to create interesting opportunities for market growth and competitive prominence.
There is also a good perspective for Agribusiness in 2024, following the growth already seen in 2023, which had a relevant number of transactions, including joint ventures, in the sector. There are credit opportunities (even though credit for agrobusiness is mostly directed at individuals rather than corporations in Brazil) and the logistics and infrastructure sector related to the agribusiness, which directly impacts the efficiency of the production and distribution chain, that can benefit from several governmental incentives, like the aforementioned infrastructure debentures.
As one of the trends for M&A in Brazil in 2024, it is also worth mentioning middle-market companies, that revealed a prominent position in recent years, with a 60% increase in the total volume of M&A transactions from 2021 to 2023. These middle-market companies are expected to remain in the spotlight. However, it is essential to outline well-planned tailor-made strategies and carry out comprehensive preparation, both legally and financially, to ensure success in M&A transactions for middle-market companies and attract investments.
Whereas there are no major expectations of political and economic distress for Brazil in the coming year, and assuming that the global market will not face substantial adversities, this should be a fruitful year for M&A and for investors seeking growth and consolidation in the Brazilian market.