Citigroup Inc, the top mergers and acquisitions adviser in Brazil this year, has almost matched the volume of deals it advised on in 2006 and the number of transactions in the works may double, the country head of its investment banking unit said.
Citigroup has worked on 19 take-overs so far in 2007 totalling about $15 billion, close to its volume last year, said Ricardo Lacerda, head of Brazil investment banking. Overall, take-overs in Brazil are 50 percent higher than in 2006 and will likely reach an all-time high by the end of the year, he said. Citigroup has a pipeline of nearly $30 billion in deals, some of which may be announced this year.
"The M&A business is extremely robust," Lacerda said in an interview. "Given the volume of deals already announced and what's in the pipeline for the main banks, this could easily be another record year."
With initial public offerings also at a record in 2007, the boom in Brazil's capital markets has driven Citigroup, Morgan Stanley, UBS and other firms to hire more bankers and expand into new businesses.
Citigroup opened a brokerage in Brazil last year and hired a team of investment bankers from Goldman Sachs in a bid to climb the take-over advice and underwriting ranks. It is now looking to start a commodities trading business, he said.
"Trading and hedging of commodities is a very promising area, a very profitable business in which we aren't present yet," Lacerda said. Citigroup had a team of eight people in investment banking when Lacerda started at the bank in December 2005 and has grown to about 30 now, adding eight bankers in the past six months. The most recent hire was Jairo Loureiro, who had worked with Lacerda at Goldman and joined Citigroup three months ago.
The expansion helped push Citigroup to the top spot in M&A advising in the first half of 2007 from eighth place at the end of 2006, according to Thomsom Financial.
The firm appointed Roberto Serwaczak from Deutsche Bank to head the new brokerage and Renato Naigeborin from Merrill Lynch to lead its trading and derivatives business. It also moved Jorio Salgado Gama, a 10-year veteran at Citigroup, and telecommunications banker Otavio Guazzelli, from New York to Sao Paulo.
Citigroup has some 30 people at its brokerage, which started up in June 2006, and 11 analysts focused on equity research in Brazil, where initial share sales are surging.
Equity offerings have broken record volumes annually since 2004, when they totalled 9.15 billion reais ($4.82 billion). So far this year 54 companies have sold 43.43 billion reais worth of stock, about 39 percent more than in all of 2006. Another eight companies have filed to sell shares.