SAO PAULO (Reuters) - Morgan Stanley MS.N and Banco Bradesco BBI SA topped Brazil's mergers and acquisitions rankings in the first quarter, buoyed by advisory roles in the $21 billion corporate reorganization of Vale SA VALE5.SA, the world's No.1 iron ore producer.

FILE PHOTO - The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in New York, New York, U.S. on January 20, 2015. REUTERS/Mike Segar/File Photo

New York-based Morgan Stanley and Bradesco BBI, the investment-banking arm of Brazil's No. 3 listed lender Banco Bradesco SA BBDC4.SA, surpassed rivals in last quarter's rankings by almost 10 times in terms of announced M&A volumes, Thomson Reuters deals intelligence data showed on Tuesday.

Both banks advised two of Vale’s main shareholders on the deal. Under the terms of the reorganization, Vale will become a company with no defined controlling shareholder within three years, a landmark step to help stifle state interference in the company.

The deal represents a milestone in a country long hobbled by corporate governance scandals and reorganizations that hurt minority investors. It comes as Brazil's government is selling dozens of power and sanitation utilities, as well as assets of state-controlled oil company Petróleo Brasileiro SA PETR4.SA.

Companies announced $27.121 billion worth of Brazil-related mergers from January to March, up six-fold from a year earlier, the data showed. Excluding Vale, the value of M&A deals reached $6.195 billion, less than half the amount seen in the same period four years ago, before the recession struck.

The number of deals in the first quarter fell 35 percent to 108 from a year earlier, the data showed.

Stricter legal and regulatory scrutiny has continued to put the brakes on M&A announcements this year, compounding the impact of the recession and political turmoil that has kept keeping buyers and sellers at odds over valuations.

According to Alessandro Zema and Eduardo Miras, co-heads of Brazil investment banking for Morgan Stanley, M&A deals should accelerate this year, even if increased debt and equity capital markets activity posed some competition for the segment.

Declining borrowing costs and a stable currency could spur Brazil’s recovery and the pace of takeovers through year-end, they said. More consolidation efforts could take place, as companies try to cut debt, improve their capital and tax structures, and become more efficient.

“It’s very hard for a strategic player or a financial sponsor to ignore Brazil because of the cycle,” Zema said. “The country’s economy offers relevant opportunities for global players in almost every segment of activity.”

According to Alessandro Farkuh, Bradesco BBI’s head of M&A, more strategic players will seek to enter Brazil as President Michel Temer’s administration passes pension, labor market and tax reforms aimed at restoring confidence in the economy.

“Activity will grow in a more robust manner once the macroeconomic uncertainties dissipate and players feel the outlook has turned much more predictable,” Farkuh said.

A challenge for buyers and sellers alike remains a lengthening M&A execution cycle. Still, growing interest from multinational companies and buyout firms in potential targets “is leading to a more adequate pricing of assets,” Bradesco BBI’s Farkuh said.

Even as the list of delayed deals kept growing last quarter, advisory work remains intense, forcing banks to shuffle staff from areas with lighter workloads to handle more M&A and debt restructuring transactions.

Morgan Stanley topped value rankings after working on four transactions worth $21.663 billion, followed by Bradesco BBI’s seven deals valued at $21.424 billion. Morgan Stanley last topped Brazil’s first-quarter M&A league tables in 2000.

Itaú Unibanco Holding SA's ITUB4.SA investment bank led the number of deal rankings after working on 10 transactions.

Following is a table with Brazil M&A ranking for the first quarter. Numbers are expressed in U.S. dollars, unless specified.

RANKING FINANCIAL ADVISORY VALUE OF NUMBER RANKING

FIRST-Q FIRM DEALS (Jan. OF DEALS FIRST-Q

UARTER 1-March 31) (Jan. UARTER

2017 1-March 2016

31)

1 Morgan Stanley & $21.663 bln 4 14

Co

2 Banco Bradesco BBI $21.424 bln 7 6

SA

3 Banco BTG Pactual $1.875 bln 4 1

SA

4 Citigroup Inc $1.656 bln 1 n.a.

5 Goldman Sachs $1.656 bln 2 n.a.

Group Inc

6 Itaú BBA SA $919.4 mln 10 2

7 Credit Suisse $706.4 mln 1 14

Group AG

8 JPMorgan Chase & $608.4 mln 2 14

Co

9 Bank of America $517.9 mln 2 4

Merrill Lynch

10 PriceWaterhouseCoo $296.4 mln 2 14

pers

SUBTOTAL WITH $26.123 bln 39 -

FINANCIAL ADVISER

INDUSTRY TOTAL $27.121 bln 108 -