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corpfina Bulletin – Friday, 27 March 2015
Dynamic International M&A Activities from Brazil
Brazilian Investors Go Global
Frankfurt am Main, 27 March 2015 – In light of the economic situation in their home country,
many Brazilian corporates and private equity investors are currently pushing forward international M&A activities. Transactions such as the planned takeover of Kraft Foods by 3G Capital
seem to indicate a new phase of dealmaking. Oscar Sträter has been heading Banco Santander
M&A team based in Frankfurt which recently expanded by basing Santander Global Retail Industry Group (M&A) in Frankfurt. In this respect, he frequently advises on Brazil-European cross border M&A transactions and now gives more colour on latest developments.
In the past, Brazilian corporates and private equity in-
zilian conglomerates and wealthy individuals are try-
vestors were primarily focused on acquisitions in Brazil
ing to diversify (outbound investments). Thirdly, the
and the Americas – what drives the change, why are
economic cycle could eventually lead to a new wave
Brazilian investors now motivated to look for targets
of foreign investors acquiring again into Brazil by tak-
worldwide?
ing advantage of a weak BRL and a long (not short-
Sträter: The main driver of
change is the deterioration
of the economic environment. Today’s Brazil is different from Brazil in the last
decade. The economy is
under pressure which im-
medium) term investment view on Brazil’s economic
potential. In 2014, despite the downturn / election
year, there were still 19 companies from the DACH region acquiring into Brazil (although some related to
existing investments such as Celesio & E.ON) but also
new investments such as Fresenius Kabi acquisition
of Novafarma (advised by Santander).
pacts M&A activity in vari-
The Brazilian investment firm 3G Capital is currently
ous ways: Firstly, domestic
preparing the takeover of Kraft Foods. Do you expect
M&A activity has come down
further comparable acquisitions by investors from Bra-
(BRA-BRA deals) given the challenging medium term
zil to come in the near future?
outlook. Secondly, a selective small group strong Bra-
Sträter: Many Brazilian companies need to focus
their resources on Brazil given the economic down
Corporate Finance Association (corpfina) e.V.
c/o Flick Gocke Schaumburg, Messeturm, Friedrich-Ebert-Anlage 49, D-60308 Frankfurt am Main
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corpfina Bulletin – Thursday, 26 March 2015
turn. We expect investments abroad now to come
from the larger and stronger Brazilian groups that already have an international footprint and are not too
much impacted by the weaker domestic economy.
These companies can afford to diversify abroad and
are (looking) to do so in a focused way.
Which industries are interesting from a Brazilian perspective?
Chart 1: Number of cross-border M&A transactions Brazil/DACH region.
Sträter: That depends on the industry: companies
like Odebrecht (construction), WEG (capital goods),
Are Brazilian private equity investors also interested in
Vale (mining); Embraer (aviation) and Inbev (a Bel-
cross-border M&A?
gian company with predominantly Brazilian management) are truly global. In addition there is now a
number of companies with an increasing global presence such in the meat sector JBS, Brazil Foods &
Marfrig, Natura (acquired Aesop in Australia). Then
there are also Brazilian champions such as Petrobras,
Braskem, Carmarga Correa, Votorantim which also
have sizable international presence.
Sträter: The vast majority of Latin America Private
Equity funds are divided in either Brazil or the Spanish Speaking countries. The Brazilian funds are usually exclusively focused on Brazil only given the size
of the market (and unlike other Latam countries less
synergies between these countries). A few exceptions
are some large Brazilian investment funds which do
invest internationally such as 3G (e.g. Burger King, the
Which regions and countries are most attractive for
recently announced Heinz –Kraft merger), Pensinsula
Brazilian investors?
(investment in Carrefour), and GP Investmentos (e.g.
Sträter: In the DACH region we have seen invest-
through its portfolio company Magnesita which has
ments in Steel (CSN acquisition of Stahlwerke Thür-
more than 65% of sales outside Brazil) which have in-
ingen – advised by Santander), Chemicals (Bras-
vested abroad.
kem´s acquisition of PP plants in Schkopau &
Which role do Brazilian family offices play in the inter-
Wesseling in 2011) and Capital Goods (WEGs acquisi-
national M&A market and what do you expect in terms
tion of KATT and Württembergische Elektromotoren
of this type of investors?
GmbH, Watt Drive in Austria and Romi’s acquisition
of Burkhardt + Weber). We do believe such strategic
investments will be very selective and mostly focused on either acquiring technology and/or distribution capabilities. In other countries there are also
acquisitions in other sectors such as for example in
restaurants: IMCs acquisition of Margaritaville restaurants in 2014 and reverse Mercapital acquisition
of a 70% stake in Brazilian´s high end restaurant
group Rubayat in 2012 (advised by Santander).
Sträter: Various large Brazilian investors intend to diversify their investments and also protect against the
BRL which has significantly weakened. These investors generally look for relatively stable investments or
investments with which they have affinity. A good example is a consortium of Brazilian investors in the
acquisition of a regional dominant shopping center
in Spain for EUR 62m (advised by Santander). Another
is the owner of a large Brazilian retailer that invested
a minority stake in a leading global duty free retailer.
Corporate Finance Association (corpfina) e.V.
c/o FGS, Messeturm, Friedrich-Ebert-Anlage 49, D-60308 Frankfurt am Main, [email protected]
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corpfina Bulletin – Thursday, 26 March 2015
Why are Brazilian investors interesting partners – what
can target companies, their management and owners
expect?
Sträter: Brazil is a very large dynamic market (Europe
+ 1/3) with a lot of competition and in the past also
significant volatility. Brazilian companies that are
successful usefully have seasoned managers that had
to navigate through significant challenges and dynamic markets and would bring such experience with
Chart 2: Number of domestic and cross-border M&A transactions related
them.
to Brazil.
Contact at corpfina:
Dr. Ruediger Theiselmann
Phone: +49 69 907 458-22
Email: [email protected]
Design:
RuppertiPlus
Agentur für Marketing und
Kommunikation GmbH, Frankfurt am Main
www.ruppertiplus.de
Corporate Finance Association (corpfina) e.V.
c/o FGS, Messeturm, Friedrich-Ebert-Anlage 49, D-60308 Frankfurt am Main, [email protected]
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