Brazil equity capital revival could help offset slow M&A

viernes 2 de septiembre de 2016 07:00 GYT

By Guillermo Parra-Bernal and Tatiana Bautzer

SAO PAULO, Sept 2 (Reuters) - Brazil's long-dormant equity capital markets could be set for a revival in the coming months that might help offset slower-than-expected merger and acquisition activity, bankers said.

Growing appetite for risk among local investors and expectations of a more business-friendly government after the ouster of former President Dilma Rousseff could help resuscitate a market that has seen only one initial public offering over the past 23 months, the bankers said. That compares with 10 over the previous two years.

While IPOs are not imminent, bankers at Itaú BBA SA and Morgan Stanley say they expect between five and seven more offerings to take place before year-end.

Brazil's benchmark stock index is up 35 percent this year, the world's second-best performer, on optimism about Rousseff's replacement by her former vice president, Michel Temer.

Stung by dozens of capital-raising deals that fell short of promised returns during Rousseff's five years in office, foreign investors in particular are wary of equity offerings in Latin America's biggest economy.

However, they could quickly return if Temer effectively tackles Brazil's budget problems and reignites confidence in the economy, said Roderick Greenlees, Itaú BBA's global head of investment banking.

"There is a situation of repressed demand for capital, which can lead more companies to go ahead with their offering plans," Greenlees said in an interview, suggesting there is pent-up appetite for such deals.

A renewed flow of equity offerings could lead to the reworking of some M&A deals now being negotiated, according to bankers including Marcus Silberman, head of Brazil M&A at Bank of America Merrill Lynch.   Continuación...