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Grupo BTG Pactual says Brazil's 2014 presidential elections will curtail M&A activity

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(Credit: Reuters) Brazil's President Dilma Rousseff speaks during the signing ceremony of the National Commitment to Improvement of Working Conditions in the Construction Industry at the planalto palace in Brasilia March 1, 2012.
President Dilma Rousseff of Brazil
January 7
2:15 AM 2014

Grupo BTG Pactual said the scheduled presidential elections in Brazil this year will prevent acquisitions from growing beyond the $78.8 billion level reached last year, Bloomberg reported. An investment bank and asset wealth manager based in Sao Paulo, Grupo BTG Pactual is the biggest merger adviser in Brazil.

In a phone interview, Marco Goncalves told Bloomberg, "Players are usually very cautious about doing investments during election years given the amount of uncertainty." Goncalves is the Head of Mergers and Acquisitions at Grupo BTG Pactual. He believes that the most deals in 2014 would be generated by companies in the infrastructure, consumer and service sectors.

On October 5, President Dilma Rousseff will most probably face Aecio Neves and Eduardo Campos in the presidential polls. Goncalves said that aside from the elections, merger volume could also be curtailed due to concerns that Brazil's credit rating could be slashed because of its rising budget deficit.

Bloomberg data showed that Brazilian firms announced 592 acquisitions in 2013 which was 14% lesser than that of the previous year. According to Goncalves, huge deals made up last year's M&A market. The ten largest acquisitions comprised over 50% of the total for 2013. In the previous year, the 10 largest deals made up 44% of $65 billion total M&A activity.

Meanwhile, Rodrigo Figueiredo Nascimento told Bloomberg, "A lot of movement is coming from private-equity investors." Nascimento is a partner at law firm Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados which managed 41 transactions in Brazil in 2013. Bloomberg data showed that this was more than the number handled by any other legal adviser.

Nascimento added that rich clients from private banking and family offices are showing growing interest in private equity investments because of the country's lower real interest rates. Another partner at Mattos Filho, Joao Ricardo de Azevedo Ribeiro said that international players are still attracted by the country's infrastructure, oil, gas and energy industries, the report said.

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