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By Guillermo Parra-Bernal
RIO DE JANEIRO, April 7 (Reuters) - Private equity-fueled mergers and acquisitions activity in Brazil may surpass last year’s 13.6 billion reais ($4.3 billion) in deals as political and economic uncertainty eases, executives at industry group ABVCAP said on Tuesday.
While economic activity is bound to deteriorate in coming months, buyout firms eyeing Brazilian investments for the long term may buy into assets whose value declined due to a sharp currency devaluation and a growing dearth of capital, said Fernando Borges, who presides over ABVCAP, a group representing buyout firms in the country.
While companies are still far from cheap, the recent correction in valuations left them more attractive, Borges and other senior executives told reporters at ABVCAP’s annual summit in Rio de Janeiro. Education, healthcare, consumer and retail industries are among the sectors drawing the most interest from buyout firms, he added.
Infrastructure, with a need of 50 billion reais of additional capital in the coming years, may attract additional commitments from buyout firms.
Infrastructure projects as well as energy and engineering companies are struggling for capital as the government curbs spending and a corruption scandal at state-controlled Petróleo Brasileiro SA limits access to debt and equity financing for some in these sectors.
With funds raising record money from clients and the amount of available money to invest at its highest level in years, 2015 looks set to be “a better year than the prior year, in theory,” said Borges, who also heads the Brazilian unit of Carlyle Group LP. “It won’t be a bargain market, though.”
The quality of available assets in the marketplace is “very good,” preventing valuations from falling further, the executives added. Still, the weak outlook for equity capital markets in Brazil, which could extend for years, may favor private equity firms as they are flush with capital, Borges noted.
Brazil-focused buyout firms fetched $5.56 billion through 23 partial or final fundraising efforts, representing more than half of the total raised in Latin America last year, regional industry group Lavca said in February.
Brazil was also the largest market for private equity and venture capital deals, with $4.57 billion in purchases through 141 transactions, according to Lavca data. That represented 58 percent of invested capital and 46 percent of deals in Latin America.
$1 = 3.136 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Lisa Von Ahn