Brazilian Tech Bets

Jul 1, 2000

Internet deals are dominating merger and acquisition activity in South America's biggest market. But value remains for investors in slow-growth, capital intensive businesses that need restructuring.

Brazil has lately become a hotbed of deal making. Latin America's largest and possibly most promising new technology market is drawing in foreign companies willing to pay surprisingly high prices for choice assets. In a landmark deal in June, Telecom Italia paid $810 million for a 30% stake in globo.com, valuing the Internet portal owned by Organizações Globo, the country´s largest media group, at $2.7 billion.

This seems a lot even for a country expected to see substantial growth. A survey by the consultants KPMG in São Paulo found that Internet and information technology deals dominated mergers and acquisitions activity in the first quarter of 2000, with 14 transactions. A year earlier, it counted just three information technology-related deals. And the size of deals has been growing all year.

In January, iG, an aggressive free-access portal, raised $100 million from investors for 14% of its equity,...

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