CNN Soft Business: Mergers and Acquisitions boom; Mappin and Mesbla have a new look

Mergers and acquisitions that took place in 2021 in Brazil moved US$ 66 billion – around R$ 340 billion –, according to data from Bain & Company. In all, there were 1963 of them, a record.

For reference, in 2016 this number was 740 companies.

The survey shows that mergers and acquisitions have gained strength in the country in recent years, consolidating themselves as a true corporate trend.

According to the global consultancy, two reasons justify encouraging this type of business. The first concerns the record of 45 companies going public on the Brazilian Stock Exchange. With the revenue surplus that the IPO brings, 61% of them made acquisitions shortly after opening.

The second was the devaluation of the real against the US dollar. This makes prices cheaper for foreign investors, who take advantage of the moment to come shopping in Brazil.

For Daniel Damiani, a partner at JK Capital, this number should continue to grow. The specialist does not see any major risk for mergers and acquisitions in Brazil, even though the country is going through a turbulent political and economic scenario.

For Damiani, most of the operations carried out in the last 18 months – which should continue to take place this year and next – derive, in large part, from cash that is already in the company specifically designed for these processes. “Besides, whoever does this type of business is a long-term investor, very different from the stock market investor, who is more sensitive to changes such as interest rates and inflation”, he explains.

“As for the elections, we know that the moment has always been turbulent in Brazil, and mergers and acquisitions investors are used to it. Generally, those who do this type of operation look at a horizon of 5 to 15 years”, he adds.

startups

Among the mergers and acquisitions that take place in the country in 2021, 30% involved startups. Despite this, they represent 5% of the value handled in these businesses.

In other words, deals involving these tech companies cost much less than traditional mergers and acquisitions.

It is different, for example, from the acquisition of Grupo BIG by Carrefour, a business in the retail sector that, alone, was closed at R$ 7.5 billion.

Or the merger of health plan operators Hapvida and Notredame Intermédica, which recently created a company with a market value of more than BRL 80 billion.

Companies think long term

According to a study by the Distrito innovation platform, Magazine Luiza is the largest acquirer of startups in Latin America. This fact reinforces the company’s plans to become a kind of “super application”, in the mold of the Chinese digital commerce giants.

In an interview with CNN Soft Business , the executive director of customer and integration at Magalu, Graciela Kumruian, explains that “no one changes a refrigerator every month. And Magalu was very strong in durable goods and electronics. Today, from the acquisition of other companies, there is a diversification of services and products that complement each other in our ecosystem”.

The companies KaBuM!, leading e-commerce in the gamer market, and Netshoes, an online sporting goods store, are just some of the examples of Magalu’s search for diversification of its product portfolio.

Other strategies, such as improving the company’s internal processes, can be noted with the acquisition of startups that offer digital financial solutions, such as fintechs Hub and Bit55, as well as logistics companies, which have reduced delivery times to consumers.

“Sometimes it seems that one acquisition is very different from another. But when we put the pieces together in the ecosystem, it makes perfect sense. As a result, counting all platforms, Magalu now has 37 million consumers and more than 180,000 shopkeepers connected”, explains Kumruian.

Magazine Luiza was not the only one to adopt the strategy of expanding its business with mergers and acquisitions with other companies.

Via, which owns the brands Casas Bahia, Ponto (formerly Ponto Frio) and the e-commerce extra.com.br, has also embarked on this movement: in the last two years, Via has acquired five companies.

Americanas, owner of the americanas.com, Submarino, Shoptime and Sou Barato brands, has invested in ten acquisitions since 2020.

The value of the deals is not usually disclosed, but a common practice — at least in the case of Magalu, Via and Americanas — is to make acquisitions through stock exchanges.

As the three companies are on the Stock Exchange, the retailers, in theory, do not need to take cash out of the box to make purchases. They only offer a large share of shares to the founders of startups, who end up becoming major partners in these larger companies.

The problem, at least in the case of Magalu, is that its shares, considering a period of 12 months (from July 2021 to July 2022), are down 86%. That is, startups bought for a certain amount in the past saw their investments as partners decrease in the last year.

For the director, however, the technology retailer’s shareholders should observe a longer horizon for investments.

“Magalu’s strategy is long-term. When I talk about a diversified ecosystem, with this breadth and variety, I am talking about a solid and consistent company, which will complete 65 years of life in 2022 and with long-term strategies”, he concludes.

In addition to exploring mergers and acquisitions of companies in Brazil, the program CNN Soft Business this Sunday (24), he will also talk about the return of two famous retail brands that had been missing from the map for two decades. After closing their physical doors, Mappin and Mesbla are back on digital.

The program airs every Sunday at 11:15 pm. You can check it out on TV and also on YouTube.