The year 2024 represented a challenging period for the mergers and acquisitions (M&A) market. Economic uncertainties created a complex scenario for companies looking for growth and expansion opportunities.
According to data from specialized consultancies, the global volume of M&As in 2024 reached the US$3.7 trillion mark, distributed over approximately 39,589 transactions. Despite the overall growth compared to the previous year, it is important to note that the number of small and medium-sized transactions (SMM) fell by 18%.
This scenario shows that, although the M&A market remains active, companies are more cautious and selective in their moves and investment decisions. The search for security and profitability has been a determining factor in M&A strategies.
Historically, the mergers and acquisitions market has been influenced by cycles of economic expansion and retraction. In periods of growth, companies tend to seek opportunities for consolidation and expansion, driven by confidence in the future and the availability of credit.
On the other hand, in times of economic downturn, the M&A market can become more dynamic, with companies in financial difficulty seeking buyers and investors looking for opportunities to acquire assets with lower valuation metrics.
Last year, the M&A market faced a scenario of uncertainty, with the global economy oscillating between growth prospects and a slowdown. The rise in the dollar and high interest rates also contributed to the caution of investors, who began to look for safer and more profitable investments.
The Venture Capital (VC) market, which invests in innovative companies with high growth potential, has also felt the impact of the adverse economic scenario.
As a high-risk type of investment, VC requires a more stable, growth-oriented and favorable macroeconomic environment in order to thrive. Economic uncertainty, high interest rates and investor risk aversion have led to a downturn in investments in startups and technology companies.
In addition to economic factors, the legal environment also plays a crucial role in the M&A market. A lack of clear rules and legal uncertainty can hinder the development of transactions and drive away investors.
In Brazil, some legal issues have generated discussion and impacted the M&A market. The updating of the taxation regime for so-called offshores, companies registered in foreign countries, has increased surveillance of structures outside Brazil and removed benefits and exemptions.
Changes in the rules governing the taxation of investment and consumer funds could also have a significant impact on M&A operations, generating the need for more in-depth studies and increasing insecurity in relation to investments.
Another point in the legal system that influences the mergers and acquisitions market is the lack of clearer corporate law. It is necessary to improve legal certainty for investors, with clear and stable rules. Furthermore, the lack of precedents in corporate disputes conducted in arbitration are some of the obstacles.
Legislation on the treatment of liabilities and contingencies in M&As, which guarantees greater security for investors and makes it possible to reduce the risk assessment of an investment, is welcome.
Also, considering that arbitrations are generally confidential, there is no standard for how arbitration chambers or arbitrators judge certain matters. Bill 2.925/23, which includes paragraphs obliging the decisions of listed companies to be made public, is a glimpse of a solution. In other words, it could generate more robust input for future resolutions.
Brazil’s judicial system is very complex, which leaves room for discussion on various issues. If there were greater standardization in the way the courts judge, it would be possible to know exactly what risks are assigned.
In addition, of course, we need to simplify bureaucratic processes and speed up the analysis of M&A operations. Support for innovative sectors, such as technology and agribusiness, can generate new opportunities. The adoption of good corporate governance practices by companies increases investor confidence and contributes to business valuation.
The outlook for the M&A market in 2025 is still uncertain. The forecast slowdown in growth of the Brazilian economy to 2.3% and global economic instability could lead to stability or even a drop in the pace of mergers and acquisitions.
For the M&A market to take off again, it is essential that there is a reduction in economic instability, greater legal certainty and a reduction in interest rates. Creating a more favorable environment for investors is essential to boost new transactions and foster the country’s economic growth.
Brazil can create a more favorable environment for the M&A market, attracting investment, generating jobs and boosting economic growth. Globalization, digital transformation and the search for innovation will continue to drive companies to seek growth opportunities through mergers and acquisitions.
By overcoming the current challenges, it could return to robust growth in the coming years, contributing to economic development and generating value for companies and investors.
