China becomes the largest investor in Brazil

As one of the BRIC countries, Brazil was projected to continue to be one of the fastest growing economies in the world.  However, the 2015 recession in Brazil resulted in a negative growth rate of 3.8%.  As a result, Brazil slid from seventh to ninth place in the world economies ranking. 

Year-to-date, Chinese companies have already purchased US$4 billion of assets in Brazil, the highest level since 2010.   According to Bloomberg, the top five countries investing in Brazil are China - 1^st, US – 2nd, Norway – 3rd, Mexico 4th, UK – 5^th.

The Brazilian currency, the Real, has depreciated more than 50%, which has enhanced Chinese and US purchasing power in terms of investment.  It’s also important to note that as compared to the US, China has experienced less political resistance when acquiring Brazilian assets.

Some notable transactions where Chinese companies made acquisitions in Brazil: 

China Investment Corp., which has a US$814 billion sovereign fund, is leading a Chinese investor group that is in talks to complete a multibillion-dollar iron-ore streaming deal with Brazil’s Vale SA.  The consortium is negotiating the potential purchase of a portion of Vale’s future iron-ore output for as long as 30 years.  Vale could fetch about US$9 billion upfront from the sale.

State Grid Corp of China, the world’s largest electricity provider by revenue, is wooing shareholders of Brazil’s CPFL Energia SA and a listed subsidiary.  It expects to secure stakes from large shareholders before making an offer for the entire company.

The Fosun Group, a major China-based investment group, with operations in several countries, signed an agreement to acquire Rio Bravo Investimentos.

Shanghai Pengxin Group Co. purchased control of Brazilian grains trader Fiagril.  People familiar with the deal said the value of the deal could be around 1 billion Reais (US$290 million).  Shanghai Pengzin, like most foreign buyers would keep current management in place. 

Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

September 19, 2016

M&A Activity in Western Europe

First Half of 2016

While the US and China receive the most media attention for M&A activity, Western Europe should not be overlooked.  The charts below reflect the deal volume and value breakdowns for the Western European countries.

In terms of the number of deals completed in Western Europe, the two countries that have seen the highest activity are the United Kingdom and Germany.  On a global level, these countries also rank well, and are usually within the top five countries for highest deal volume.  The UK significantly outpaced German deals in the first half of 2016, closing almost 50% more transactions.  It should be noted that Germany is completing significantly more deals in 2016 than they did in 2015.  The chart below reflects the top five Western European countries with the greatest deal volume.

By deal value, the UK is still the leader in Western Europe for the first half of 2016 with their transactions totaling US$119,342MM.  Surprisingly, despite its high volume of deals, Germany does not hold second place for deal value, but rather drops down to fourth.  Switzerland has more than doubled its deal value as compared to the same time period in 2015, and holds second place in Western Europe.  For the first half of 2016 Switzerland completed US$66,276MM in deals, as compared to the same period in 2015 when they had completed US$31,663MM.  Shown in the chart below are the leading Western European countries with the highest deal value.

Post Brexit many have their eye on Western European M&A deals.  It is expected that as the British Pound fluctuates against other currencies, so will the number of transactions between countries.  While Brexit may help firms in the United States expand abroad at a reasonable price, overall deal activity within the UK is uncertain for the second half of 2016.  Many believe the deal volume will fall, however some economists are optimistic about deal flow and predict it to pick up during the remainder of the year.

Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

September 15, 2016

China - M&A Lending

China recently made changes to its government policies, encouraging Chinese companies to expand abroad.  Domestic banks are adapting to the policy changes by prioritizing M&A lending.  As a result, companies are able to easily obtain loans for acquisitions.  For example, China CITIC Bank International made a US$12.7 billion loan in June allowing China National Chemical Corp. to purchase Syngenta AG.  Many similar deals have recently been completed thanks to readily available financing. 

Previously, only top tier Chinese banks would engage in cross-border M&A; however, second tier banks are now aggressively lending.  As banks work hard to increase deal volume, Chinese banks are expected to improve their ranking for financing M&A transactions.  Bank of China is currently ranked 20th in global M&A lending.  In order to facilitate M&A transactions, Chinese banks are starting to establish overseas branches which will make the M&A process more convenient for its clients.  These banks are more capable than ever to move quickly in cross boarder deals and Chinese companies that are backed by state lenders have been extremely active in closing cross boarder deals.

While policy changes have made a positive impact, they are not the only factor driving Chinese cross-border M&A.  Investment opportunities in China are becoming harder to find.  The country’s economic expansion is slowing and domestic companies are looking abroad to diversify and meet growth objectives.  Large companies in particular have found limited opportunities for acquisitions within China.  Additionally, by making foreign acquisitions, companies have been able to expand trade and move into new markets.  Most companies in the market for acquisitions are searching for well-known brands and advanced technology.

Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

September 2, 2016

Global M&A: Mexico

Regarding Global M&A, Latin America has moved into the spot light for investors.  Both private equity firms and strategic buyers are realizing the potential this location holds, and as of late, Mexico has been of great interest.  Over the past few years the Mexican government has made a big push to increase investment in its country.  Mexico has specifically targeted foreign investors by working hard to address corruption, labor, and tax issues.  Additionally, laws have changed to allow Mexico’s pension funds to invest up to ten percent of their assets in private equity, which will promote economic growth.

Despite new investment, as a whole, Latin America is still struggling.  Brazil is currently in a recession, and Columbia’s GDP growth rates are low.  While these economic problems are of great concern to locals, it allows foreign investors to capitalize on both the exchange rates and discounted assets and companies.  These investors see an opportunity to buy low and sell high.  The World Bank recently announced that by 2030, fifty percent of the population in Latin America will be middle class.  This fact alone has provided investors with confidence that the economies will continue to grow and bounce back in the coming years.

Mexico is popular due to its strategic location.  Not only do the time zones correspond with the United States, but its location is unbeatable.  For firms that are looking to expand supply chains abroad, Mexico is a perfect fit.  As compared to China, producing in Mexico greatly shortens the supply chain, and is generally less expensive.  Coincidentally, China is currently experiencing an overall decline in local manufacturing.  Businesses selling to consumers in the United States are looking to keep supply chains as short as possible, and Mexico is becoming the cheapest and easiest way to do it.

Strategic buyers are not the only group interested in Mexico; private equity firms are moving in too.  The volatility in the region is attractive, especially for investors who have a longer time horizon.  Experienced investors are making purchases not bothering to worry about short term problems, but rather focusing on the long term gain.  Mexico has now surpassed Brazil as the most popular destination for private equity investment in Latin America.

All in all, over the last 10 years the focus of M&A in Latin America has changed significantly.  Argentina was previously a hot spot for deals; however, Brazil then started to gain popularity and most of the investment activity.  Brazil is still very exciting for foreign investors as they are able to buy companies at deep discounts, but now investors are also exploring Mexico.  Another country that currently presents unique investment opportunities is Chile, which may provide more stability than other Latin American countries.

Versailles Group is a 29-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

August 9, 2016

M&A Activity - First Half 2016

Top Five Countries

With regard to M&A in the global arena, it’s fascinating to observe which countries attract the most activity and how that evolves over time.  The charts below reflect the top five countries with the highest deal value and volume for the first six months of 2016.

The United States and China have been able to maintain their M&A leadership in the first half of 2016.  In terms of deal volume—the number of transactions completed worldwide—the US accounted for 23% of the deals completed while China captured 10% of the deals worldwide.

The chart below represents the number of M&A transactions completed by country in the first six months of 2016.  The US and China dominate this category, with 10,151 and 4,519 deals completed respectively.  When compared to the first quarter, the breakdown by volume for these five countries has remained remarkably similar.  Each country has been able to continue closing deals at roughly the same pace. 

Represented in the chart below is the value of M&A transactions completed by country, for the top five countries, in the first six months of 2016.  The US and China are again leaders in this category.  Collective deal value in the United States reached US$633,441MM, and China’s total transactions were valued at US$390,570MM.  Switzerland remains in the top five countries for deal value, which is uncommon; however, during Q1 Syngenta was acquired by ChemChina, and this one large deal is in part responsible for Switzerland’s high rank.  

Two countries to keep an eye on for the remainder of the year are Australia and France.  Lately, Australia has been receiving media attention for potential growth in M&A deals.  For the first half of 2016, Australia came in only 282 deals behind Germany.  It will be interesting to see if Australia is able to push up into the top five countries for volume next quarter.  Likewise, France is trailing Canada in the rankings for deal value so far in 2016.  As M&A activity is likely to experience shifts throughout Europe after the Brexit vote, M&A activity by county may look slightly different next quarter.

Versailles Group is a 29-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

August 4, 2016

M&A in Brazil - Bargain Hunt

At this point in time, Brazil is providing M&A buyers with incredible opportunities for a number of reasons.  Despite a history of healthy economic growth, Brazil’s economy has recently lost momentum.  The country has officially been in a recession since the end of 2014, with no immediate recovery in sight.  Inflation is now over 10%, and unemployment reached 9% in 2015.  Additionally, the Brazilian stock market has plummeted along with its currency.  The chart below depicts the decrease in the value of the Brazilian real in comparison to the US dollar.

Compounding the economic problems, Brazil is experiencing temporary political unrest due to a large corruption scandal.  There isn’t much hope for economic improvement in 2016; however, once the political turmoil settles, economists are optimistic about what 2017 will bring for the Brazilian economy.  Brazil boasts a large domestic market, with a variety of innovative industries and an abundance of natural resources.  The previous decade’s economic growth averaged around 4 to 5 percent per annum.  It is likely that the economy will start to grow at the tail end of this crisis, as the Brazilian government has plans to address the economic problems in the form of cutting public spending and implementing policies through the Central Bank.

What does this mean for foreign investors?  Brazilian companies are the cheapest they have been in years, and with a vast array of investment options.  In short, Brazil presents a unique opportunity.  This is echoed by the fact that foreign investors are flocking to the region, and are beginning to outpace local investors.  The chart below compares foreign investors to Brazilian investors.

M&A buyers that can look beyond two or three years will be able to achieve excellent returns.  The Brazilian economy has the capability for strong and consistent growth.  Over the years, the middle class in Brazil has grown, literacy rates have increased, and Brazil is the 8^th or 9^th largest economy in the world.

In conclusion, an M&A buyer can capitalize on the current domestic situation, which has resulted in slashed valuations and many opportunities where sellers have to sell.  Furthermore, foreign investors will also be able to capitalize on the strong US dollar as compared to the Brazilian Real, which make Brazilian acquisitions incredibly affordable and will enable investors or acquirers to earn a healthy return on their investment in the future.

Versailles Group is a 29-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

July 20, 2016

M&A Activity in Asia Grows, Led by China

While global M&A activity in Q1 2016 was lower than the record-breaking deal volume witnessed in Q1 2015, one bright spot has emerged amid volatile markets and political uncertainty: China.  In Q1 2016, China claimed its largest quarterly share of global mergers and acquisitions on record.  According to Thomson Reuters, roughly US$110 billion in M&A deals, or 15 percent of global deal value, involved Chinese buyers. 

The chart below depicts deal value in China across the past five years, 2012 - 2016. The value of outbound Chinese deals in Q1 2016 ($110 billion) surpassed China’s previous annual record of $109 billion over the whole of 2015.

Overall, M&A activity in Q1 2016 throughout Asia increased by 9 percent compared to Q1 2015.  Last year, the region reached a deal value of US$275 billion, accounting for almost 40% of global deal value (US$699 billion).  When analyzing the activity by country, China played a significant role in M&A activity across the continent.  Mega deal activity, characterized by deals which have a value greater than $5 billion, contributed to China’s M&A prowess, as the top ten deals in Asia all had either a Chinese company as an acquirer or a seller.  The largest deal in Q1 2016 was China National Chemical Corp’s acquisition of the Swiss company Syngenta, which amounted to a $46 billion transaction and marked China’s biggest takeover of a foreign company. 

Recently, China has exhibited a strong appetite for foreign acquisitions, particularly in the U.S.  O’Melveny law firm’s 2016 investment study suggests that Chinese business owners’ investment in the U.S. will be higher in 2016 than in previous years.  The study mentioned the U.S. as a key target nation for Chinese acquirers, as Chinese buyers are looking for growth at a time where their home markets are facing a relative slowdown.  Overall, China’s cross border deal value has increased over the past year; including both inbound and outbound acquisitions.  Specifically, China’s cross border deal value totaled $95.1 billion in Q1 2016, representing an increase of 136 percent compared to Q1 2015.  

Chinese companies have emerged as a dynamic force in deal making in a number of sectors.  China’s increased M&A activity highlights its attempt to serve its growing consumer class, as the nation copes with sharp declines in its stock market and less domestic economic growth prospects.  According to Barclay’s Head of Americas M&A, Larry Hamdan, we should “expect China outbound M&A to continue as they seek to bring leading international brands and technologies to their home market and to drive growth by expanding into new geographies.”  Gilberto Pozzi, co-head of global M&A at Goldman Sachs, agrees that China is attempting to drive growth through cross border acquisitions, asserting that “robust Chinese M&A activity was primarily driven by a combination of decelerating growth in China, leading companies to diversify across geographies, and government support on foreign strategic acquisitions.” 

In the future, we can expect China’s remarkable amount of outbound M&A activity to continue. According to Pozzi, decelerating growth and the government’s encouragement of foreign acquisitions are both “strong tailwinds which direct towards continued outbound Chinese M&A activity for the rest of 2016 and beyond.”  As more Chinese buyers have recently begun to hire advisers very early in the deal making process, we have seen more and more successful transactions.

Versailles Group is a 29-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

July 12, 2016

Brexit Middle Market M&A

U.S. middle-market M&A is, for the most part, shielded from the Brexit volatility, according to Franklin Square’s senior economist, Lara Rhame.  In 2015, U.S. middle-market companies generated 87 percent of their revenues from domestic sales.  Of the 13 percent of the middle-market revenues generated outside the U.S., only 3 percent came from Europe.  Thus, M&A in the U.S. should not be drastically impacted by Britain’s exit from the EU, as U.S. companies have placed a greater emphasis on buying and selling both domestically and outside of Europe. 

Nevertheless, the post-referendum weakening of the British Pound relative to the U.S. dollar could potentially have significant implications for M&A activity between Britain and the U.S.  As the exchange rate between the Pound and the Dollar fluctuates, so do sales between the two countries – this phenomenon is known as the substitution effect.  As the Pound strengthens against the Dollar, Pound denominated goods and services become more expensive, meaning that Dollar denominated goods and services become more attractive.  Hence, U.S. sales to Britain increase, and British sales to the U.S. decrease.  In contrast, when the Pound weakens, Pound denominated goods and services become less expensive, resulting in Dollar denominated goods and services becoming less attractive.  Thus, U.S. sales to Britain decrease, and British sales to the U.S. increase. 

Ultimately, this substitution is rooted in the notion that as prices rise, consumers will replace more expensive items with less costly alternatives.  In recent years, the exchange rate of the British Pound to the U.S. Dollar has averaged about US$1.60.  This rate declined a bit throughout the start of 2016, and dropped to roughly US$1.36 immediately after the Brexit vote.  Overall, this low exchange rate puts the Pound near a multi-decade low relative to the U.S. Dollar.  One possible effect of this record-low exchange rate is substitution; in terms of M&A, this substitution could potentially lead to U.S. companies buying more companies in the U.K. 

Studies have repeatedly suggested that U.S. middle market companies should consider expanding outside the U.S.; these companies should either buy or sell overseas, or potentially establish overseas operations.  Hence, the decision to expand generally comes down to the choice of either building or buying.  In the most basic terms, a target company in the U.K. that is selling will cost about 15 percent lower in U.S. Dollar terms compared to two or three years ago.  This reduction is very beneficial for U.S. companies looking to buy British companies.  Consequently, some private equity firms have argued that the Brexit economic uncertainty will bring prices on potential U.K. acquisitions down to more reasonable levels, which could spur cross-border M&A activity.

A good M&A advisor with cross-border transaction experience should be able to assist in acquiring a company in the UK.  As always, it’s important to have several targets in mind so that the very best acquisition is completed.

Versailles Group is a 29-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

July 6, 2016

2012 was a year of uncertainty. There were notable events, such as the U.S. Presidential election, fiscal cliff, and the status of Greece’s future in the European Union, that caused many companies to delay their execution of various growth strategies.

Despite these hesitations, on a global basis, the number of Middle Market M&A transactions increased by 4% from 2011 to 2012.

Looking forward, we expect that some companies will retain a conservative strategy due to the upcoming U.S. debt ceiling drama and the European socio-economic issues. However, shrewd companies will take advantage of the vast number of global growth opportunities and make strategic offensive and defensive acquisitions. As a result, we expect there will be a higher level M&A activity in 2013.

The year 2012 was a tumultuous time, filled with uncertainty and apprehension as the global community grappled with a series of significant events. From the highly anticipated U.S. Presidential election to the looming threats of the fiscal cliff and the precarious future of Greece within the European Union, these key moments left many businesses feeling cautious and hesitant about their growth strategies. As companies navigated through the turbulent economic landscape, many chose to delay their plans for expansion, opting instead to adopt a more conservative approach.

Looking ahead to the future, it is likely that some companies will continue to tread carefully, especially in light of the upcoming U.S. debt ceiling drama and the ongoing socio-economic challenges in Europe. However, for those with a keen eye for opportunity, there is a wealth of global growth possibilities waiting to be seized. By strategically pursuing both offensive and defensive acquisitions, these savvy businesses will be well-positioned to capitalize on the changing landscape and drive higher levels of M&A activity in 2013.

Versailles Group is a Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

The most notable M&A news in Q3 was that there were more transactions in the United States/Canada region than there were in Europe. This is unusual, but we fully expect it to continue in the coming quarters as there seems to be limited progress in the resolution of the economic issues in Europe.

In Q3 the total number of M&A transactions in the United States/Canada increased by 137 to 4,372, which represented a 3% increase year-over-year. The Africa/Middle East, Asia Pacific, and Latin America/Caribbean regions all saw larger percentage increases during the same time period, 4%, 9%, and 9%, respectively. The only region that experienced a decrease in Q3 was Europe, where M&A activity dropped by 12% to 4,220.

The net result of all of these changes was that the combined number of transactions worldwide fell by 1% year-over-year, from 12,146 to 11,993.

Historically, Q4 is the busiest quarter for M&A. Therefore, we are expecting a strong fourth quarter in most regions.

The most notable M&A news in Q3 was the significant increase in transactions occurring in the United States/Canada region compared to Europe. This shift is quite unexpected, but it appears to be a trend that will persist in the upcoming quarters due to the ongoing economic challenges faced by European countries. The divergence in M&A activity between these two regions reflects a broader narrative of economic uncertainty and market dynamics that are influencing global investment trends.

Versailles Group is a Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.