BTG Pactual tops Brazil M&A rankings as recovery gains steam
SAO PAULO, Oct 1 (Reuters) - Grupo BTG Pactual SA led Brazil's mergers and acquisitions rankings in the first nine months as Chief Executive Officer André Esteves' focus on advising fast-growing segments translated into almost $4 billion worth of announced deals in the July-September period alone. The São Paulo-based bank leapfrogged rivals such as Credit Suisse Group and Itaú BBA in so-called league tables after landing 14 deals in the third quarter alone, Thomson Reuters data showed. So far this year, BTG Pactual has advised on 36 transactions totaling $11.73 billion, or a third of announced deals in the year through Sept. 30. Companies announced $34.15 billion worth of deals in Brazil in the first nine months of the year, down 37 percent from a year earlier, a quarterly Thomson Reuters report on M&A activity said. That is the lowest for the January-to-September period since $14.07 billion in deals were announced in 2005. The number of deals fell to 426 in 2013 from 647 in the same period of last year, the report showed. Takeovers will continue to gain traction because of the need to consolidate market gains in some industries, the involvement of private-equity firms in local M&A and interest from global conglomerates in tapping Brazil's nearly 200 million consumers, said Marco Gonçalves, managing director for M&A at BTG Pactual. Gonçalves and other bankers shrugged off a view among many investors for months that erratic policy decisions, mounting state interference in some sectors and a slowing economy were behind a slump in M&A activity in Brazil. Instead, they said the deterioration in global markets and a price gap between buyers and sellers were the main culprit behind the slump. "There is more visibility in terms of the macroeconomic outlook and, despite the existence of a great deal of uncertainty in global markets, bidders and sellers are finally reaching common ground," Gonçalves said in an interview at BTG Pactual's offices in São Paulo. As Brazil's $2.3 trillion economy stagnated, buyers pressed for lower prices while sellers refused to give in - creating a mismatch that prevented the completion of several deals for months. In addition, worries that the U.S. Federal Reserve will soon taper off years of economic stimulus also kept global investors and dealmakers cautious. But an 11 percent slump in Brazil's currency, the real , since May helped bring down the price of many Brazilian companies more attractive for potential bidders in dollar terms. "That might have made valuations a little more attractive, perhaps helping close the price gap," Alessandro Farkuh, head of M&A for Bradesco BBI, the investment-banking unit of Banco Bradesco SA, said in a phone interview.
MOMENTUM For investment banks, which depend on giving merger advice for about half their revenue in Brazil, the government's willingness to sell rights to drill for oil and operate airports and toll roads could mean a boon for business. Strategic buyers, especially local players in the consumer goods and infrastructure sectors, are looking for takeover targets in a country where about 40 million people joined the middle class in the past decade, said Fabio Mourão, who heads M&A advisory for Credit Suisse in São Paulo. "Foreign investors are a little more cautious, because they don't operate here. That is why you should see more local consolidation movements - as foreigners stay on the sidelines, strategic local investors gain space," Mourão said. BTG Pactual advised Vale SA on the $1.8 billion sale of its VLI SA general rail- and port-cargo unit to a group of Canadian, Japanese and Brazilian investors. The bank also saw the fruits of a non-exclusive partnership with debt-laden tycoon Eike Batista after advising on a $559 million stake in logistics company LLX Logística SA to EIG Global Energy Partners in August. The bank's strong dealflow in the third quarter included cross-border transactions in the real estate, card payment processing, mining and leisure industries. BTG Pactual expects deals in the infrastructure and services sectors to also gather pace through year-end, Gonçalves added. Credit Suisse trailed BTG Pactual and ranked second in terms of deal size, advising on 16 takeovers worth $9.28 billion. The deals included education company Estacio Participações SA's $271 million purchase of rival TCA Investimentos e Participações Ltda. Credit Suisse also advised LLX on the EIG deal. Foreign banks such as Credit Suisse have stayed atop rankings in the past few months as private equity and sovereign wealth funds look for advisors with global reach to help them with Brazilian deals. "Buyout firms are well capitalized, and what I take from my talks with them is that more deals are in the offing," Credit Suisse's Mourão added. Itaú BBA, the investment-banking unit of Brazil's No. 1 private-sector lender Itaú Unibanco Holding SA, advised on $7.11 billion worth of deals in the January-to-September period. Bradesco BBI ranked fourth, after participating in 12 deals worth $5.46 billion. Itaú BBA advised on MMX Mineração e Metálicos SA's sale of its Chilean unit in August. Itaú was No. 2 ranked in number of deals, with 29 - only behind BTG Pactual. The following is a table with M&A rankings in Brazil for the first nine months of the year.
RANK FINANCIAL ADVISOR RANKING NUMBER MARKET VALUE OF OF SHARE DEALS DEALS (VALUE OF
1. Grupo BTG Pactual SA $11.73 bln 36 34.3 pct 2. Credit Suisse Group $9.28 bln 16 27.2 pct 3. Itaú BBA $7.11 bln 29 20.8 pct 4. Bradesco BBI $5.46 bln 12 16.0 pct 5. Bank of America $4.28 bln 7 12.5 pct
6. Goldman Sachs Group $4.05 bln 9 11.9 pct 7. Morgan Stanley & Co $3.53 bln 6 10.3 pct 8. Citigroup Inc $3.27 bln 3 9.6 pct 9. Rothschild $3.20 bln 9 9.4 pct 10. Deutsche Bank AG $1.77 bln 3 5.2 pct