BTG Predicts 40% Merger Surge This Year: Corporate Brazil

Banco BTG Pactual SA, the adviser on more Brazil deals last year than any other firm, predicts mergers will surge in 2013 as the economy rebounds and concern eases that antitrust rules will block transactions.

“We see an increase of up to 40 percent in takeovers,” Marco Goncalves, head of mergers and acquisitions at the Sao Paulo-based bank, said in an interview. “The pipeline now is the biggest I’ve had since I started at BTG in the beginning of 2009.” He forecast that infrastructure, retail and electric power industries will see the most activity.

Economic growth in Brazil, the world’s largest emerging market after China, will probably jump to 3.2 percent this year after an increase of less than 1 percent in 2012, according to a central bank survey of economists released this week. Companies announced 668 mergers in Brazil last year, down 9 percent from 2011, after a new law required buyers to seek antitrust approval before closing transactions.

Concern that the rule will stymie new business is waning, Goncalves said. “The new law was tested in the second half of last year and the process adopted by the antitrust authority is very quick,” he said in an interview at the bank’s Sao Paulo headquarters.

The dollar amount of merger transactions declined 37 percent in 2012 to $63.3 billion, the lowest since 2007, while deals announced worldwide fell 13 percent to $2.32 trillion, data compiled by Bloomberg show.

Quicker Approvals

Since the new rules took effect, the authority approved 60 deals with no competitive concerns in an average of 20 days, and shortened the time for analyzing more complicated takeovers to an average of 50 days, down from 150 before the changes, Carlos Ragazzo, general superintendent of the authority known as Cade, said in an interview on Nov. 7.

“Many people didn’t believe we would make this work,” Ragazzo, who has authority to approve takeovers that don’t require further antitrust review, said in the interview. “There was a lot of tension between the law being signed and going into effect. And I think the results were much better than expected.”

Credit Suisse Group AG ranked first by dollar value for Brazilian mergers in 2012, with $31.5 billion, the data show. The Zurich-based bank worked on the five biggest deals in Brazil last year, including Itau Unibanco Holding SA’s 11.8 billion real ($5.79 billion) takeover of credit-card processor Redecard SA and cement maker Camargo Correa SA’s 4.07 billion euro ($5.44 billion) acquisition of Cimpor Cimentos de Portugal SGPS SA.

Larger Deals

“Nowadays we have a lot of multibillion-dollar M&A deals in Brazil,” Hans Lin, co-head of investment banking at Bank of America Merrill Lynch in Brazil, said in an interview in Sao Paulo. The Charlotte, North Carolina-based bank took the seventh position in the 2012 ranking by value of deals.

“Companies are flush with cash and business confidence will pick up this year amid stronger economic growth of about 3.5 percent,” Lin said, adding that fees for banks that advise on acquisition transactions may rise more than 20 percent this year from 2012.

Fees for M&A activity in Brazil grew 2 percent to $416.61 million last year, according to Dealogic, the London-based information and consulting service. The takeover area was responsible for 45 percent of the total revenue for investment banking in the country in 2012. The total, which also includes syndicated loans, bonds and equity underwriting, fell 2 percent from the year earlier to $915.9 million.

Credit Suisse

BTG ranked first in M&A fees with $106 million, an increase from about $67 million in 2011, when the bank also ranked first. Credit Suisse was No. 2 by takeover fees in 2012, with $69 million, up from $57 million, Dealogic said.

“This year will be as good as last year,” said Allan Libman, head of investment banking at Credit Suisse Brazil, adding that M&A activity doesn’t depend only on current economic growth because most companies try to anticipate investments before growth picks up. “Today, companies don’t have the luxury of avoiding Brazilian markets.”

Credit Suisse, which broadened its presence in the local market after acquiring Banco de Investimentos Garantia SA in 1998, now has a team of 35 investment bankers, one of the biggest in Brazil, Libman said. The lender is the only foreign bank ranked among the top five by the number of deals last year, according to data compiled by Bloomberg.

BR Partners

Weak economic growth in Brazil may limit takeover activity growth to 10 percent or less, said Ricardo Lacerda, chief executive officer of BR Partners, the Brazilian investment bank founded by former Goldman Sachs Group Inc. executives.

“We have many doubts about the Brazilian performance and because of that the volume of acquisition deals will be up just a bit,” he said in a telephone interview.

JPMorgan Chase & Co., which ranked ninth last year from 12th in 2011, handled the $400 million acquisition of Fogo de Chao Churrascaria Holding, the restaurant chain, by private-equity fund Thomas H Lee Partners LP. The New York-based lender also advised on the $4.9 billion takeover of Amil Participacoes SA by UnitedHealth Group Inc., the No. 1 U.S. health insurer.

“M&A decisions are long-term ones, and when you have a year like last year with a lot of noise in the markets and doubts about the economic future, then companies tend to hesitate,” said Patricia Moraes, co-head of investment banking at JPMorgan in Brazil. Enthusiasm for takeovers “all over the world will rise a lot this year as Europe’s sovereign-debt crisis recedes and the slowdown in China eases,” Moraes said.

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