The top-ranked law firm for mergers and acquisitions in Brazil this year is Mattos Filho, Veiga Filho, Marrey Jr. & Quiroga Advogados after it helped complete more buyout-fund transactions than any other legal adviser.
Mattos Filho handled deals totaling $14.3 billion this year through yesterday, giving it 27 percent of the market and propelling it past 2011’s leader, Barbosa Mussnich & Aragao, according to data compiled by Bloomberg. The Sao Paulo-based firm advised on eight of the 64 transactions involving buyout funds so far this year.
“Increasing competition for deals between private-equity funds has kept us working a lot,” Joao Ricardo de Azevedo Ribeiro, a senior partner at Mattos Filho, said in an interview. He credited the firm’s New York office for winning assignments on international buyouts.
Estok Comercio & Representacoes Ltda., owner of the Tok&Stok chain of furniture stores, hired Mattos Filho to advise on its sale of a 60 percent stake to Carlyle Group LP (CG) for 700 million reais ($343 million). The law firm also advised London- based private-equity company Actis LLP on its pending 180 million-real purchase of Cruzeiro do Sul Educacional, a Sao Paulo-based for-profit university.
Private-equity funds participated in 64 M&A transactions in Brazil, or 12 percent of the 552 deals so far this year. That’s up from 57 deals, or 9.6 percent, of the 596 transactions announced in the same period of 2011, according to data compiled by Bloomberg.
“When equity issuance is weak, private-equity funds, which demand higher returns than the capital market or strategic investors, take a bigger role in mergers and acquisitions,” said Alexandre Bertoldi, a partner at Pinheiro Neto Advogados, which ranked second for the period and advised on $13.4 billion of transactions.
That can cut both ways, said Fernando de Almeida Prado, a partner at Pinheiro Neto.
“If the market is weak for a long time, private-equity firms also end up reducing the pace of acquisitions because they don’t have the traditional way out of their investments,” Prado said.
Mattos Filho and Pinheiro Neto tied for first place based on the number of deals, with 37 transactions each. Mattos Filho was No. 1 based on that basis for the previous three years.
“For a lawyer, the number of transactions done is more important than the value because we don’t earn a fee from the value of deals, but a fixed value by hour of work,” said Carlos Lima, the Pinheiro Neto partner who handled the $4.9 billion acquisition of Amil Participacoes SA (AMIL3) by UnitedHealth Group Inc. (UNH), the No. 1 U.S. health insurer, announced on Oct. 8.
Merger volume in Brazil fell 38 percent through yesterday compared with the same period last year to $53 billion as economic growth slowed.
“The European crisis reduced the volume of public-equity offerings this year, and because of that we didn’t have all that abundance of capital for acquisitions,” said Marcos Rafael Flesch, a partner at Sao Paulo-based Souza, Cescon, Barrieu & Flesch Advogados, which ranked third for the period with $11.8 billion of transactions. “Besides that there are a lot of very cheap assets outside Brazil to compete with the companies here.”
“Some European companies are having to sell their crown jewels in Brazil to raise cash, but the market knows that and they are not finding the price they want,” said Carlos Jose Rolim de Mello, a partner at Machado Meyer Sendacz & Opice, which ranked second based on number of transactions at 35.
Both Mattos Filho and Souza Cescon worked on the biggest deal of the year, the $6.84 billion buyout of Redecard SA by Itau Unibanco Holding SA. (ITUB4) Itau was Redecard’s largest shareholder, with a 50 percent stake, when it offered in February to buy the rest of the company and delist it. The transaction was completed on Sept. 25.
Regulatory changes and government pressure to reduce prices are damping interest in acquisitions in some sectors after shares fell. Brazilian President Dilma Rousseff this year has pushed banks to shrink interest rates, utilities to cut power bills and phone operators to drive down wireless costs for consumers to fuel growth and curtail inflation.
“The increasing participation of the State on the economy can reduce the volume of mergers and acquisitions next year”, said Francisco Antunes Maciel Mussnich, partner at Barbosa, Mussnich & Aragao.
‘Rushed to Close’
“A lot of companies rushed to close deals in the first half of the year before a new antitrust law took effect, and after that activity slowed,” said Moacir Zilbovicius, an M&A lawyer and senior partner at Mattos Filho.
Under legislation implemented on June 1, buyers must seek antitrust approval before closing transactions. The antitrust authority, known as Cade, has said it will take no more than 330 days to review a proposed merger. Previously, companies filed requests to review a deal after an accord had already been closed, allowing operations to be integrated before approval from Cade, which could take as long as two years in some cases.
“Cade is being very quick and I believe M&A activity will rebound next year,” Zilbovicius said.