Brazil mergers to gain steam on hopes of rebound

* Mergers and acquisitions in Brazil to pick up

* Value of deals seen growing

* Companies in financial distress seen as targets

By Aluisio Alves

SAO PAULO, May 29 (Reuters) - Mergers and acquisitions activity in Brazil looks poised for a strong revival in the coming months, as signs of improved global sentiment spread across domestic capital markets.

Opportunistic investors are boosting appetite for risk, encouraging business executives to consider joining forces with rivals to ensure the survival of their firms, according to bankers and consultants interviewed by Reuters.

Although a return to the frenzied pace of mergers and acquisitions seen at the end of 2007 and the start of 2008 looks unfeasible now, the gap between buyers and sellers is closing as valuations show signs of stabilizing.

The boom that sent company valuations in Brazil skyrocketing at the end of 2007 turned bust last September, when prices plummeted as the credit crunch intensified.

"We are witnessing that expectations over valuations are going through a correction," Carlos Mello, partner with Sao Paulo-based law firm Machado, Meyer, Sendaz e Opice, told Reuters earlier this week. The firm advised in the takeover of poultry company Sadia (SDIA4.SA) by rival Perdigao (PRGA3.SA) and the purchase of a 42.5 percent stake in air taxi Lider Aviacao by Bristow.