Investors have once again set their sights on the Brazilian IT sector given lower valuations, prospects of faster digital adoption, and recent signs that Latin America's largest economy could be regaining its foothold. An uptick in monthly preliminary GDP data in May — along with a significant drop in market volatility indexes — could usher a wave of smaller, targeted investment M&A deals in the financial space, industry experts said. Improved conditions could mark a gradual reversal from the sharp dry up in funding seen at the beginning of the pandemic. Deal-making in the industry has been kept alive despite the recent economic downturn and high levels of uncertainty due to the spread of coronavirus. S&P Global Market Intelligence data shows financial companies made 19 purchases in the second quarter of 2020, with Brazilian XP Inc, Credit Suisse and JP Morgan among the most recent reported buyers. "The fintech market has just become bigger," Rafael Pereira, president of the Brazilian Association of Digital Credit, said in an interview. "A faster digitization of businesses makes the tech side of fintech much more attractive right now." Brazilian online broker XP — which tapped nearly $2 billion in its 2019 IPO in the U.S. — was the most active buyer in the quarter. Only in June, it scooped up supply chain financing firm Antecipa, insuretech DM10, investment software provider Carteira Online, and an eye clinic in Curitiba. "(XP's) move shows a company eager to gain market share and is seeing opportunity in what is going on," Pereira said. Prospects of faster digitization combined with cash-strapped fintechs creates the "perfect condition" for industry consolidation, he added.

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/investors-gear-up-for-acquisitions-in-brazilian-it-sector-59203156