Welcome to the annual Brazil M&A and Private Equity Forum
The digitization of business, government reform, and the growth of Latin America's middle class has deep implications for economic participation among the masses – perhaps the first time for many in the post-Columbian era. While need and opportunity converge to drive the growth of investing in Brazil, the record amount of venture capital and foreign investment that is pouring in could spark unprecedented business and M&A opportunities.
Please join the Mergermarket team and esteemed panelists in Sao Paulo for a day of discussion and debate around the contours of Brazilian M&A.
Registration and Breakfast
State of Brazilian M&A and Private Equity
As the economy starts to recover and low interest rates fall, fundraising for private equity funds and M&A should benefit. In fact, fundraising for Brazil increased markedly with USD 1.5bn raised in 2017, representing a 121% increase from the previous year. Established GPs are currently raising several large funds for the country, indicating Brazil's economic growth may have renewed LP interest. Moreover, Brazil accounted for 41.2% of Latin American M&A activity by value in 2017 as a result of GDP growth and consistent consumer spending, which looks to continue for the remainder of this year. The biggest question everyone is asking: Will October's elections stall progress?
Panelists will discuss and debate the near-term prospects for leveraged buyouts as well as mergers and acquisitions in Brazil.
- The latest forecasts on October's elections and what that it means for investors.
- What can domestic partners do to reduce currency exchange and other common risks for international investors?
- How will domestic and international capital markets perform over the coming months for LBO and M&A transactions? Will the roll-back in lending from state-owned institutions continue?
- What sectors and assets are prime targets for acquirers?
- Updates on the progress of reforms – government spending, taxation, regulation, and pension plans.
Placing the Spotlight on Brazil's Steadfast Sectors
While energy and mining businesses get all the press, serious investors are looking over Brazil's burgeoning consumer goods and technology sectors. Along with energy, these represent the top three fastest growing industries, followed by industrials and financial services. Fragmentation among technology firms could drive consolidation in the industrial market beyond 2018 as acquirers look to exert control over their firm's entire value chain. Additionally, recent market developments have encouraged investors to look at the blossoming Brazilian fintech sector, which secured USD 186m in VC funding in 2016.
Delegates will have an opportunity to listen to panelists discuss consumer goods, technology, industrials, and other industries that represent some of the best opportunities in Brazil.
- Will tech-related incubators and "accelerators" take off, such as seen with the launch of Magma Partners' first-ever Sino-Latin America Accelerator venture?
- What strides are Brazilian industrials making with incorporating and developing IoT, AI, 3D printing and machine learning applications?
- What are the prospects and investment opportunities within the consumer retail and food and beverage subsectors?
- Will the education sector see more activity following Actis' sale of a 40% stake in Cruzeiro do Sul to GIC and Kroton's acquisition of Somos Educaco??
- Will the healthcare industry finally fulfill its potential as a major generator of deal activity?
Coffee Networking Break
Natural Resources, Energy Endure as Leading Sectors of Activity
Opportunities are plentiful following the controversy around Petrobras, which now finds itself locked out of the capital markets and forced to raise liquidity by selling off USD 16bn in assets. The pre-salts offshore acreage production boom will require plenty of accompanying energy infrastructure, providing lucrative opportunities for pipeline, gathering system and processing plant operators and investors. And Petrobras' state-ran cousin in the power sector, Eletrobras, is auctioning off transmission assets, representing a once-in-a-lifetime opportunity for investors. Meanwhile, the mining industry in Brazil looks set to continue its reliable stream of deal activity, especially after recent regulatory reform.
Panelists will discuss the country's most notable consolidated sectors: energy, mining and utilities.
- How has Brazil's mining industry emerged from accidents that once chilled dealmaking and activity? Are opportunities returning to the market?
- What can market players anticipate from the new mining regulatory agency?
- Are market players responding to the government's search for private investors who would finance energy and power infrastructure projects? What new market framework is emerging?
- What is the outlook for Brazil's offshore oil and gas production and corresponding energy infrastructure?
- Will the market see growth in corporate and public utility PPAs for conventional and renewable energy?
- Assessment of valuation and financing within the EMU sector.
Exogenous M&A Winds its Way Through the Amazon
The US has been the largest foreign investor in Latin America since 2012, accounting for nearly one-third of all transactions by buyers. However, companies from Canada, China, and Europe are becoming more competitive in order to increase their market share, acquire strong local brands and/or gain market entry. However, as Brazilian industrialization progresses and begins to offer additional opportunities, obstacles remain. Access to cost-effective currency hedge instruments are lacking, preventing some GPs from investing in the region. Moreover, information access and market volatility can also present a challenge to some deals.
Delegates will have an opportunity to listen to panelists debate and discuss how foreign investment is shaping M&A and private equity transactions.
- Are any new cost-effective currency hedging tools coming to market that will incentivize new potential market entrants? How are these contracts being structured?
- How do the value propositions of US investors differ from those of Canada, China, Europe, and elsewhere? What kind of value are they adding to Brazil's family-owned businesses?
- How are international buyers closing the valuation gap while in negotiation with family-run businesses?
- How will BDNES' pull-back in lending affect foreign investment? What opportunities will be created?
- How can Brazilian partners assist international investors with workarounds to regulatory barriers, obtain sufficient information on targets during due diligence, and bridge cultural differences?
- With the removal of some regulatory and trade barriers to Latin neighbors, how are regional investors and strategics shaping Brazilian M&A?
- How is the Brazilian government and industry responding to the neighboring Pacific Alliance trade bloc – Chile, Colombia, Mexico, and Peru – that is attracting investment and M&A?
Coffee Networking Break
The Buyout Business Bounces Back in Brazil
Brazilian retail and other consumer subsectors will be the most attractive area for private equity investment over the next three years, according to a Latin American Private Equity & Venture Capital Association study. Market observers have remarked that investment in third-party logistics, software assets, and subscription-based services will also be favored by private equity firms in the years to come. Most importantly, domestic market fundamentals are supporting the buyout business as borrowing costs are kept at historic lows thanks to accommodating central bankers. While state-owned banks retrench, their private counterparts such as Itau and Banco Bradesco are looking to expand their loan portfolio.
Panelists will discuss the potential fortunes that await private equity investors in Brazil.
- Assessment and mid-term outlook of Brazilian credit markets.
- What kind of impact is the maturation of capital formation and the rise of cash-rich credit funds having on private equity firms looking to structure their LBO debt stacks?
- As private equity firms go to private credit funds for LBO mezzanine financing, how is that relationship maturing compared to traditional bank relationships?
- What is the outlook for private equity's favored sectors and assets?
- What kind of effect are Brazil's Securities Commission reforms to fund formation and fund management having on the LBO business?
- How is the domestic private equity industry responding to competition from abroad?
*Agenda is subject to change