BRAZIL: An Introduction to Corporate/M&A

Positive and Continuous Economic Growth

The economic landscape in Brazil has been moderately positive in 2024, with a 2.2% GDP increase forecast as of October. This growth was driven by continued investment and a fall in Brazil’s unemployment rate. Sectors that stood out in 2024 include technology, renewable energy, agribusiness, infrastructure and healthcare. The technology sector continued to show promise due to increasing innovations and investment. Meanwhile, the growing concern for protecting the environment and seeking sustainable energy sources has bolstered the renewable energy market. The healthcare sector, in turn, has benefited greatly from the demand for medical services and technological advances within the field. Finally, the agribusiness, banking and infrastructure sectors have also performed solidly.

This upward trend is expected to continue in 2025, with a 2.4% GDP increase forecast. This growth will be supported by a gradual recovery in domestic demand and economic policies aimed at stabilising inflation and attracting investment. However, issues remain that must be addressed to ensure long-term sustainable growth, such as tax challenges, high interest rates, and the need for structural reforms.

The technology, renewable energy, infrastructure and logistics, and agribusiness sectors are expected to continue to stand out. Technology will continue to be a driver of innovation and efficiency, attracting significant investment. The global transition towards cleaner and more sustainable energy sources will make renewable energy even more important. Agribusiness, which is already a traditionally strong sector in Brazil, should benefit from technological advances and the growing global demand for foodstuffs and biofuels. Brazil’s ongoing need for improvements in transportation, port infrastructure, and logistics networks, driven by the growing agribusiness and e-commerce sectors, will attract both private equity and strategic investors.

M&A: Activity Level

An analysis of the M&A landscape in recent years, combined with current macroeconomic indicators and key domestic factors, can provide useful baseline data for establishing an outlook.

The global economy has faced significant challenges. The war in Ukraine, trade tensions among large economies, and the uneven recovery from the COVID-19 pandemic around the world have contributed to increased uncertainty and reduced investor confidence.

Between 2022 and 2024 (to date), the Compound Annual Growth Rate (CAGR) for overall M&A transactions in Brazil dropped 27%, mainly due to high interest rates that increase transaction capital and opportunity costs.

Conversely, this has boosted the capital markets sector, with greater investments in debt that offer higher and more stable returns, and more favourable financing conditions.

Despite a brief drop in transaction values, the new government administration’s soft-landing strategy, combined with the implementation of beneficial measures (such as tax reform, the growth acceleration programme, interest rate reduction and inflation control), have ensured that the M&A market in Brazil remains robust, with positive prospects.

As in recent years, certain industries in Brazil have continued to lead M&A rankings, such as technology, energy and agribusiness. Other sectors, in turn, have maintained a relatively strong pace, fuelled by the recent global boom in commodities (oil and gas, forestry, paper and pulp, and mining, among others) or by local demand, such as for education and health services.

Finally, the Brazilian government has continued to benefit from substantial private investment in hard infrastructure (energy, airports, highways, ports, telecommunications and sanitation), as well as in smart city projects (public lighting, public transport, technology infrastructure, etc).

Outlook, Challenges and Opportunities

Thanks to a series of favourable conditions, the M&A market in Brazil has the potential to grow significantly in 2025. Available liquidity in the market, both from investment funds and companies with substantial cash flow, creates an environment that benefits these transactions. In addition, many companies see mergers and acquisitions as an effective strategy to consolidate and expand their operations, and increase their capacity, even in challenging times.

Economic recovery prospects also play a crucial role in increasing M&A transactions. With the strengthening of multiples and a recovering economy, investor interest is likely to grow. Changes in the regulatory environment and favourable government policies should facilitate these transactions further, establishing a more attractive landscape for companies seeking to expand through mergers and acquisitions, and for investors seeking profitability from portfolio diversification.

This increase in foreign investor interest in Brazilian companies should also stimulate the M&A market. The capital and expertise provided by international investors attracted by opportunities in Brazil should further foster these transactions. These factors, combined with a carefully planned strategy and adequate financial resources, should contribute to maintaining a robust M&A transaction environment in Brazil in 2025.