01 September 2010

International eyes on Brazil

Brazil’s hosting of the 2014 World Cup and the Olympic Games in 2016 has sparked a wide range of M&A interest in the country – from advertising to airport security. No doubt this will accelerate over the coming months and years but recent ones to watch include São Paulo advertising agency Talent and the security firm Plantech, which look set for investment from Publicis Group of France and UK-based G4S, respectively.

The country’s excellent economic growth prospects have drawn world leading security company G4S to seek market leadership through two acquisitions in as many months. The UK-based firm now owns Brazil’s number one banking security software company Instalarme after a GBP 23.50 million (USD 36.45 million) purchase at the start of June and is in the process over taking over Plantech, which provides video monitoring and intruder alarms for public spaces such as airports, hospitals and hotels. It’s easy to see the link to 2014 and 2016, and G4S will be scouting for other purchases before the opening ceremonies.

International investment in Brazil’s resources has been a staple for a very long time, but headlines are currently dominated by service industry deals. The Financial Times believes Publicis might buy a large stake in Talent, an advertiser with the likes of Sony Ericsson, Cargill and Santander on its books.

The Parisian marketing heavyweight is looking to bolster declining revenues by adding assets in high-growth regions. To this end it recently bought São Paulo digital marketer AG2 Desing and it is unlikely that this will be Publicis’s last Brazilian acquisition. The recession-worn global marketing industry is in need of tonic and what better than the high-spending, fast-living Brazilians as they prepare to host two of the biggest parties in the sporting world.

The growing consumer market is firmly on the radar of major international players – evidenced by Carlyle Group tapping into Scalina, the country’s largest manufacturer and retailer of woman’s hosiery and lingerie, this week. And with Chile’s LAN Airlines looking to enter the fray there should soon be a shiny new Latin American carrier; in mid-August LAN inked a USD 3.39 billion memorandum of understanding to acquire TAM as it attempts to create a leader for South America.

According to Zephyr, the M&A database, there has been almost USD 30 billion of international investment in Brazil so far in 2010 compared to USD 51 billion for the whole of 2009. Deal numbers are down – 150 so far compared to 340 in 2009 – but the value of investment looks strong. And in the M&A disaster year that 2009 has become, the value of non-Brazilian companies buying into Brazil jumped 29 per cent year-on-year to reach the highest level on record.

© Zephyr