(Estadão) – “We’ve seen strong and renewed interest,” said executive Daniel Wainstein – By Cristiane Barbieri
July 25, 2023
Having worked in the mergers and acquisitions market for decades, Daniel Wainstein has witnessed Brazil being regarded almost as a global outcast by major investors in recent years. These investors virtually removed the country from their list of destinations for capital. “There was a mix of rhetoric against environmental preservation and attacks on democratic institutions that investors wanted to steer clear of,” says Wainstein, a senior partner at Seneca Evercore, a Brazilian consultancy specializing in M&A and a partner of the global investment bank Evercore. Coupled with last year’s electoral uncertainties and doubts surrounding the new government, the result was a weak first half for the sector as a whole. While transactions totaled $27.2 billion during the same period in 2021, this year they amounted to only $7.6 billion.
According to Wainstein, however, the outlook is starting to change. “Until April, we were licking our wounds,” he says. “Now, we’ve seen strong and renewed interest from both major financial and strategic investors (those interested in operating the businesses), many of whom still don’t have a presence in Brazil,” he explains. Among these is Puerto Rico-based company Evertec, which recently acquired the Brazilian firm Sinqia in a deal that could be worth R$2 billion. Additionally, the U.S. investment fund Dragoneer, alongside General Atlantic, has been negotiating the acquisition of the education company Arco. Both deals are among the transactions Seneca Evercore was involved in during the first half of the year, which together could amount to R$9.2 billion.
Wainstein’s optimism, however, is directed toward the future. With 35 deals in progress, he predicts that the next 12 months will be significantly stronger in terms of deal closures, potentially returning to the levels of the first half of 2021. “Several negotiations that were on hold have resumed, and new ones have begun because the buying side of the equation—international financial or strategic investors—has started to see a Brazil with fewer gray clouds in the sky,” he says. According to him, financial investors familiar with the local market were the first to return, willing to take some risks to “buy before prices fully rebound.” Now, strategic investors are also showing interest, drawn by a less risky outlook. “For them, it’s not as important to buy at a low price because their goal is to stay for years, building a business that requires a stable environment,” he explains.
Positive Signals for Brazil, Says Wainstein
Of course, Wainstein acknowledges that Brazil will always carry some level of risk, but he emphasizes the country’s robust domestic market and strong growth potential. Recent reforms, economic stability, democratic resilience, and the potential appreciation of the real have all had a significant impact on investor sentiment. While key aspects of tax reform—such as income tax and dividend regulations for investors and individuals—still require clarification, the signs so far have been positive, according to him. “The tax bottleneck has historically diminished foreign investors’ success prospects and our overall productivity,” he says. “The market reacts to signals, and so far, those signals have been very good.”
He highlights technology, general service sectors, and consumer goods as areas drawing foreign interest. Notably, fintechs and financial services stand out. According to Wainstein, this is a sector poised to drive consolidation and greater maturity, as the world of finance in Brazil undergoes rapid transformation.
This article was originally published in Broadcast on 07/25/23 at 5:52 PM. https://www.estadao.com.br/economia/coluna-do-broad/brasil-voltou-a-mira-de-grandes-investidores-externos-diz-seneca-evercore/
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