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Oranjestad, July 12, 2013 - Deal-making might look like it is going through a slow patch in Brazil given the country’s weakening economy and currency volatility. But that depends on your perspective.
Lincoln International, a US-based boutique advisory firm that targets mid-market deals, is one of those with a different view. It said on Wednesday it was buying the financial advisory division of a Brazilian domestic rival, the Stratus Group.
In the first half of this year, Brazilian mergers and acquisitions volumes fell 60 per cent year-on-year to $18.1bn, the lowest half-year since 2006, according to figures from Dealogic. The number of deals, meanwhile, dropped 35 per cent to 317 transactions during the first half. The average deal size fell to $132m, the smallest value since 2005.
This all means that while Brazil’s M&A market may be less juicy for the very large players, the middle market of between about $50 to $250m remains active.
“We continue to be strong believers in the Brazilian mid-cap M&A market,” James Sinclair, chief executive officer of Lincoln International Brazil, told beyondbrics.
“What we seeing in the M&A market is that the large transactions have slowed down not only because of general nervousness but because of the perception of government intervention in certain sectors like power, mining and telecoms. Where we act, that sort of direct government intervention has less of an impact – companies that are making acquisitions in the auto-parts sector, the food sector, the services sector.
What they are still looking at is the fact that the Brazilian market offers a lot of opportunities. And the consolidation in the Brazilian market continues independently really of foreign interest.”
The acquisition of the Stratus division will increase Lincoln’s team from 4 to 10 bankers. The Stratus team will continue to focus on mid-market private equity.