Conducted in partnership by ABES, BR Angels and Solstic Advisors, the study shows that 86% of entrepreneurs believe that the moment is positive for mergers and acquisitions
Among those planning to close a deal, 66% are interested in the technology sector; e-commerce (5.7%) and logistics (5.7%) come next
Due to the challenges of the current economic scenario, M&A transactions are seen as promising by 86% of entrepreneurs and senior executives of Brazilian companies, with 50.5% intending to carry out some transaction in the next 12 months.
The data was revealed by “ABES/BR Angels/Solstic Advisors survey: perceptions about mergers and acquisitions in the current scenario of the Brazilian market”, held in partnership by the Brazilian Association of Software Companies (ABES), one of the most representative entities of the Information and Communication Technology sector in the country, BR Angels Smart Network, a national angel investment association made up of more than 150 entrepreneurs and CEOs of important companies, and Solstic Advisors, a company specialized in investment operations. M&A (Mergers and Acquisitions) and in fundraising.
The study, carried out in July 2021 with the participation of 105 senior executives, reveals that the sectors that should most announce M&A operations in the coming months are technology (66%), e-commerce (5.7%) and logistics (5 .7%). The majority of respondents (35.8%) intend to invest between R$ 1 million and R$ 5 million in acquisitions; 17% plan to invest between R$ 5 million and R$ 15 million and 9.4% consider values between R$ 30 million and R$ 50 million. Only 3.8% stated that they should contribute more than R$ 50 million. Already 30.2% of respondents preferred not to open the amounts.
For Orlando Cinta, founder and CEO of BR Angels, startups have a lot to gain from the increase in M&A operations in the country. “Our survey shows an acceleration of M&A after the pandemic, which brings a promising scenario, especially for startups and businesses that bring innovative and complementary solutions in various markets. Mergers and acquisitions are great opportunities for new entrepreneurs to quickly scale their business with other companies already consolidated in their segments”, he declares.
Advancement of Corporate Venture
Among the executives interviewed, 13.3% claimed to have participated in M&A operations in the last two years. Of these, 50% carried out transactions in the IT market, while 14.3% chose retail and another 14.3% chose the financial sector.
“Low interest rates around the world and the high liquidity offered by central banks boosted stock exchanges and heated up the scenario of mergers and acquisitions, especially in 2020. This trend continues”, comments Flávio Batel, founding partner and CEO of Solctic Advisors.
According to the study, efforts aimed at mergers and acquisitions should gain prominence over the next 24 months. For this, 23.8% of respondents intend to implement a Corporate Venture program to invest in or acquire start-up external businesses. However, today, the majority (75.2%) do not have a structured M&A area in the company. Of the 24.8% that have an area dedicated to this purpose, 10.5% have an external department, only 7.6% have the structure internally and only 2.9% have a structure dedicated to Corporate Venture.
What investors analyze
When carrying out an M&A transaction, most respondents (63.8%) assess the business model of the company to be invested or acquired*. In addition, executives also analyze scalability (52.4), innovation (50.5%), financial health (43.8%), team and leadership (41%), valuation (33.3%), organizational culture (27.6%) and governance (25.7%).
Among the reasons that lead them to consider the operation*, the possibility of increasing market share appears in first place (42.9%). Other reasons that encourage the decision are the incorporation of technologies (35.7%), the acceleration of the digital transformation (21.4%), the inclusion of talents (21.4%), the entry into new markets and segments (21.4) and the gain in competitiveness (14.31TP1Q).
Technology is the hot ball
With the acceleration of digital transformation as one of the impacts of the pandemic, 81.9% of respondents said they had made some move to adapt their businesses to the new reality, which could strengthen the scenario for mergers and acquisitions, especially in the IT sector. The study showed that 50.6% increased investments in the IT sector. Of these, 85.1% invested in software, such as SaaS and Cloud, in addition to purchasing hardware and equipment (40.2%) and services such as maintenance and installation (39.1%).
“Getting closer to technology businesses turned out to be doubly beneficial in this scenario. First, due to the promising moment the segment has faced with the digital transformation. Second, to meet the need for these resources at home. These are some of the reasons that should contribute for us to see more M&A operations in the technology market in the coming months”, completes Rodolfo Fücher, president of ABES.
Methodology
THE “ABES/BR Angels/Solstic Advisors survey: perceptions about mergers and acquisitions in the current scenario of the Brazilian market” was held during July 2021 and collected responses from 105 high-ranking entrepreneurs and executives in Brazilian companies from different segments, such as technology, services, education, retail, industry and agribusiness. The main objective was to understand how entrepreneurs see the current market for mergers and acquisitions.
*multiple selection question.
About ABES
ABES (Brazilian Association of Software Companies) aims to contribute to the construction of a more Digital and less unequal Brazil, in which information technology plays a fundamental role in the democratization of knowledge and the creation of new opportunities for all . In this sense, it aims to ensure a business environment conducive to innovation, ethical, dynamic, sustainable and globally competitive, always aligned with its mission to connect, guide, protect and develop the Brazilian information technology market.
Since its foundation in September 1986, ABES has sought to be relevant to its associates and a national and international reference in the technology sector. Recently, the entity launched, in partnership with EY, the LGPD diagnosis, a free online tool and the LGPD / ABES index, in order to help companies analyze their level of adequacy with the LGPD (General Data Protection Law) ). Based on the more than 3,000 diagnoses performed, the LGPD ABES index, point out that only about 40% are in compliance with the LGPD, more details visit: https://diagnosticolgpd.abes.org.br/.
Currently, ABES represents approximately 2 thousand companies, which total about 85% of the software and services segment's revenue in Brazil, distributed in 24 Brazilian States and the Federal District, responsible for the generation of more than 210 thousand direct jobs and annual revenue of the order of R$ 80 billion in 2020.
About BR Angels
Graduated in 2019, the BR Angels Smart Network is a national association made up of more than 150 entrepreneurs and CEOs of important companies that, in addition to financial capital, deliver intellectual capital, valuing above all the concept of smart money.
With varied profiles in senior management, human resources, finance, sales, marketing, technology, among others, BR Angels members are all C-Level and are connected to large companies that, together, add up to more than R$ 1 trillion in value. Marketplace.
BR Angels arises not only to fill the gap of action with smart money identified among angel investment groups in Brazil, but also to make up for the lack of associations made up of CEOs, advisors and important entrepreneurs within the startup segment in the country.
Initially, BR Angels focuses on businesses operating in the B2B, B2B2C and B2C segments, within which smart money can be widely used through mentoring. In this way, the group hopes to support solid entrepreneurship initiatives so that it can effectively contribute to the economic development of Brazil and Latin America.
About Solstic Advisors
Founded in March 2019 in São Paulo, the Solstic Advisors is a Mergers & Acquisitions boutique specializing in M&A operations for companies in the segment middle market, that is, medium-sized businesses with annual sales of up to R$ 500 million, mainly located in cities in the interior of Brazil. Another service offered by the company is the capital advisory (Growth fundraising processes).
One of Solstic Advisors' main differentials is to offer its clients in M&A operations, at no additional cost, a Board of Advisory Advisers with solid management experience formed by C-Level executives or entrepreneurs from the most diverse sectors, such as Theo van der Loo, former CEO of Bayer in Brazil; Marly Parra, partner at iHub Investimentos and member of the IBGC's Governance Ethics Committee; Fabio Fernandes, Global Head of Lide Units; Dionísio Freire, founding partner of Vogel Telecom and Breno Silva, Managing Director for EMEA at Qintess.
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