Between 2018 and 2019, the number of M&A transactions in Latin America and Brazil was driven by the privatization of state-owned companies, with ER&I (Energy, Resources and Industrials) with approximately US$53 billion, and Financial Services with US$45 billion, the sectors that attracted the most investment.
The year 2019 also set records for the M&A industry, with growth of 48.3% in the number of operations and 31.1% in volume, reaching R$264 billion, with emphasis on the large number of operations with values exceeding R$ $1.0 billion.
In 2020, the scenario that had been showing a positive story faced the effects of the first year of the Covid-19 pandemic, resulting in a drop in foreign investments in Brazil. However, across sectors, information technology, energy companies and hospitals and clinical analysis laboratories saw an increase in the number of transactions.
After the market better understood the implications of the pandemic on M&A operations, 2021 ended with growth of 65% compared to 2020, with a focus on the information technology, telecommunications and media sector, hospitals and clinical analysis and health laboratories; financial institutions and others. The year also recorded the highest volume of investments, despite the beginning of the interest rate increase cycle. In 2022, the first half of the year surpassed the first quarter of the previous year in terms of transactions carried out. However, throughout the year, the impact of rising energy costs on inflation and the consequent increase in interest rates around the world resulted in more conservative decisions by company boards.
Thus, there was a drop in attractiveness as a result of the nebulous scenario of high interest rates associated with rising inflation. In Brazil, American companies, which are traditional actors in M&A processes, reduced their activity, directly related to the drop in foreign acquisitions in the technology and internet sector. Additionally, more conservative strategies and more restrictive valuations were decisive factors in reducing the presence of foreign funds in operations with Brazilian companies. The sum of all these factors ended up impacting the value of deals, which globally showed a drop of 36% in 2022.
We enter 2023 with a scenario where we can expect bold moves, an increase in the volume of small and medium-sized transactions, a balance between scale and scope, valuations still under a lot of pressure and managers seeking to balance their portfolio with more resilient and sustainable companies.
Until 2025, we expect a gradual increase in consolidation movements in all technology segments and especially in SaaS and Fintechs, as value expectations and companies' objectives adapt to the more restrictive capital market scenario.
