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private equity in Brazil

Page history last edited by Brian D Butler 1 year, 5 months ago

 

Table of Contents:


 

 

Private Equity Firms in Brazil:

 

International Firms with PE operations in Brazil:

  • Citi (based in Miami)
  • Blackstone Group (see news article below) - partnership with: Patria Investimentos

 

 

Local Brazilian Firms

  • Axxon Group
  • Bradespar
  • Companhia Riograndense de Participaçoes (CRP)
  • CVC Opportunity Equity Partners
  • Decisão Gestão de Fundos (DGF)
  • Dynamo Venture Capital
  • Eccelera do Brasil
  • FIR Capital Partners:  new fund 2008: $150 million;  high tech focus:  Draper Fisher Jurvetson partner in Brazil
  • Forma Inc
  • GP Investimentos  (see article below): new fund 2008:  $2,000 million (is this right? wow!)
  • Icatu Equity Partners
  • IdeiasNet 
  • Itamby
  • ITC Ventures
  • Jardim Botânico Partners (JB Partners)
  • Kinea (of Itau) - www.kinea.com.br
  • Latin Tech Capital Inc.
  • Mercatto Venture Partners
  • Multicapital
  • Pátria Private Equity - partnership with:  Blackstone Group (USA)
  • Patrimônio Investimentos e Participaçóes Ltda.
  • Rio Bravo
  • Stratus Investimentos Ltda.
  • Sul America Capital Partners
  • The Southern Cross Group Brazil
  • TK Partners
  • TMG Capital Partners
  • Trivèlla Investimentos
  • Votorantim Ventures

 

 

 

 

2009 confirmed speakers include ...

 

http://www.terrapinn.com/2009/pelatam/C8318.stm

  • Paul Homsy, CEO, Crescent Group, USA
  • Erwin Roex, Partner, Coller Capital, UK
  • Patricia Dineen, Managing Director, Siguler Guff, USA
  • Paulo Caldeira, Managing Director, Citigroup Venture Capital International, USA
  • Julio Marquez, Managing Director and Head for Latin America, Global Emerging Markets Group, USA
  • Carlos Garcia, Co-Managing Partner, DLJ South American Partners, Argentina
  • Paulo Bilyk, Co-CEO, Rio Bravo Investments, Brazil
  • Jianlin Song, Portfolio Manager, Summer Hill Family Office, USA
  • Duncan Littlejohn, Director, Latin American, Paul Capital, Brazil
  • Scott Swensen, Managing Partner, Conduit Capital Partners, USA
  • Steve Kargman, President, Kargman Associates, USA
  • Roger Berry, Partner, Climate Change Capital, USA
  • Henrique Teixeira Alvares, Founding Partner, NEO Investimentos, Brazil
  • Eduardo Elejalde, Founding Partner, Latin American Enterprise Funds, USA
  • Federico Weil, Managing Partner and Founder, CAP Ventures, Argentina
  • Eric Appourchaux, Principal - Investment Manager, Fair Energy SA, Colombia
  • Michael Underhill, President & CEO, Capital Innovations, USA
  • Jose Martinez Sanguinetti, Chief Investment Officer, Rimac Seguros, Peru
  • Pedro Paulo de Campos, Managing Partner, Angra Partners, Brazil
  • Marta del Rio, Director of Investments, AC Capitales SAFI, Peru
  • Lizardo Miranda, General Manager, AC Capitales SAFI, Peru
  • Alexandre Tilmant, Head of Private Equity - Energy & Commodities, BNP Paribas, USA
  • Roldan Trujillo, General Manager and CEO, CIFI, USA
  • Alvaro Gonçalves, Managing Partner, Stratus Group, Brazil
  • Leonardo Ribeiro, Ocroma Private Equity, Brazil
  • Rodolpho de O. F. Protasio, Partner, Mundie e Advogados, Brazil
  • Eliot Kalter, President, EM Strategies Inc. and Senior Fellow, The Fletcher School at Tufts University, USA
  • Jose Fernandez, Managing Director and General Counsel, Stepstone Group, USA
  • Nick Wollak, Managing Partner, The Axxon Group, Brazil
  • Héctor Cateriano, Director General, SEAF Colombia, Colombia
  • Eduardo Ramos, Managing Director, FSA, Mexico
  • Claudia Arango, Senior Vice President, AIG Capital Partners, Inc, USA
  • Erik Carlberg, Managing Director, Alta Growth Capital, Mexico
  • Dirk Donath, Managing Director, Eton Park Capital Management, USA
  • Jose Pano, Director, UBS Pactual, Brazil
  • Alejandro Schwedhelm, Managing Director, Financial Services, Darby Overseas Investments Ltd., USA
  • Mauricio Carmago, Director and Founder, Altra Investments, Colombia
  • Miguel Perrotti, President, Invest Tech, Brazil
  • James Sinclair, Managing Director and Partner, CFS Partners, Brazil
  • Alex von der Goltz, General Partner, CoreCo Latin America, USA
  • Humberto Zesati, Managing Partner, Latin Idea Ventures, Mexico
  • Victor Zerbino, Partner, Prosperitas Capital Partners, Uruguay
  • Javier Escorriola, Investment Director, Latin America, Norfund, Costa Rica
  • Russell Deakin, Partner, CRP Companhia De Participaceos, USA
  • Friederike Hofmann, Investment Manager, Latin America and Global Debt Finance, SIFEM, Switzerland
  • Cesar Pachon, Chief Investment Officer, GenSpring International, USA
  • Sissi Frank, Senior Investment Officer, Belgian Investment Company for Developing Countries SA/NV – BIO, Belgium
  • Kevin Corrigan, Senior Vice President, Energy & Infrastructure Group, TCW, USA
  • Amaury F. Junior, Founding Partner and CIO, Vision Brazil Investments, Brazil
  • Diego Lozano, Director, Fiduagraria, Colombia
  • Dario Duran, Director, Altra Investments, Colombia
  • Mauricio Levitin, Managing Director, Peninsula Investments Group, Latin America
  • Jose Guilherme Cruz Souza, UBS Pactual, Brazil
  • Annette Berendsen, Manager Business Development Private Equity, Netherlands Development Finance Company (FMO), The Netherlands
  • Carlos Sanmiguel, Partner, Fair Energy SA, Colombia
  • Daniel Martínez-Valle, Director of Business Development, Cisco Latin America, Mexico
  • Rodrigo Mattos, Partner, Mundie e Advogados, Brazil
  • Javier Alarcó, Head of Private Equity, Valanza- Grupo BBVA, Spain
  • Maria Fernanda Suarez, VP Investments, Porvenir, Colombia
  • Juan Pablo Ospina, Director General, GEM Colombia, Colombia
  • Geoffrey David Cleaver, Senior Vice President-Private Equity, Banco Real S.A., Brazil
  • Ben Heap, Executive Director, Infrastructure Asset Management, UBS Global Asset Management, USA
  • Steve Jacobs, Global Head of Infrastructure and Private Equity, UBS Global Asset Management, UK
  • Monique Fridell, Senior Vice President, The Zitelman Group, USA
  • Andre Burger, Partner, FAMA Private Equity, Brazil
  • Marcelo Marinho, Managing Partner, Sapiens Investments, Brazil
  • John R. Jonge Poerink, Managing Partner, LJH Linley Capital LLC, USA
  • John C. Stephens, Managing Partner, EM Alternatives LLC, USA
  • Carlos Cesarman, CFO, PINFRA, Mexico
  • Noah Beckwith, Partner, Aureos, UK
  • Fernando Marques Oliveira, Head of Latin American program, General Atlantic, Brazil
  • William Pearce, Director, Investment Funds, Overseas Private Investment Corporation (OPIC), USA
  • Maximiano Gonçalves, Associate Partner, International Technologies Marketing, Brazil
  • Richard Moore, Former Treasurer, State of North Carolina, USA
  • David Thomas, Director, Intel Brasil, Brazil
  • Isaac Pinto Averbuch, PPP Unit Director, Ministry of Planning, Brazil
  • Rudolf Hommes, Former Minister of Finance, Colombia; Managing Director, Capital Advisory Partners
  • Jose I. Robledo, Managing Partner, Estrategias Corporativas S.A., Colombia
 
 
 
 

 

Venture Capital Money in Brazil: 

 

vc industry in Brazil:  active, big money...but focused on "big plays":    example:   Eike Batista. On June 13th the entrepreneur floated some of the stock in OGX, an oil company he created last year. It has yet to start drilling and therefore has no proven reserves. It has fewer than 100 employees. And yet the initial public offering raised $3.6 billion, giving the company a similar market value to Google when it floated in 2004.   see article:  "raised a further $1 billion from venture capitalists".

 

 

 

 

Technology investment trends in Brazil:

 

 

 

 

 

Private equity in Brazil

 

Local Challenges

 

1. high Cost of Capital

 

One of the major difficulties of private investing in Brazil is the relatively high cost of capital, and hence the high hurdle rate (see our discussion on WACC) when analyzing investment opportunities. 

 

When looking at a private investment, it is important to also keep one eye on the returns that can be achieved in the stock market.  Equity investors have a choice about where to put their money.  On one hand, they can easily invest in the stock market, and achieve the expected average return (using an ETF, they would get the "market return", and would assume the "market risk").  The benefit of investing in the stock market is that it is very liquid, transparent, and efficient.  They can take their money out at any time.  Also, because the companies publish all of their financial data online, it's easy to check their balance sheets, and compare them vs other companies in the market.  This is not true with private companies.

 

With private companies, investors should receive a premium over what the market is returning because they are assuming additional risk (less liquidity, less transparency, etc). 

 

But, in Brazil there is a problem in that ordinary investors have come to expect 10-11% returns as normal (average) for assuming very little risk.  With the stock market booming in recent years (it was the top performer in the past 12 months), there is an environment where local investors are facing a very large hurdle when analyzing local private investments.  If more money can be made in the stock market, many local investors are hence wondering what incentives they might have to invest in riskier (and less liquid) assets.

 

Opportunity for Foreign PE capital

 

In my opinion, this creates an opportunity for foreign investors, who may be more patient, and more willing to finance deals that Brazilians are not.  This reminds me of the situation back in the mid 1990's when Japanese investors had a much lower cost of capital than US competitors, and were therefore more willing and able to consider investing in projects that paid back in a longer time period.  If the WACC is too high, then local investors are discouraged from looking at long-term investments (because the discount rate compounds and makes it difficult to pay back).  But, competitors (foreigners) with lower WACC are able to look at longer-term investments, and be more patient in their investment analysis.

 

2.  Accounting - informal business challenges

 

The main challenge for PE investments in the middle market in Brazil is the fact that many of the best opportunities are with companies that are family run, and in Brazil there is a tradition of keeping two sets of books...one for the tax-man, and another for the cash account....but for PE investors, you need to really know the position, so having two sets of books is a real impediment.

 

good thing about the recent boom in credit availability is that many companies had the incentive to move from the informal to the formal sector (in order to access credit), and so there are more companeis with just one set of books....

 

Opportunitis of interest in Brazil:

 

Pension reform:  Changes in Regulations = opportunities for foreign capital

 

see our discussion on: Brazil pension reform

 

Asset manager BlackRock is hoping for a series of regulatory changes to open up the Mexican and Brazilian pension and mutual fund businesses 

 

According to Blackrock:  "We see the Chilean, Colombian and Peruvian markets as very open and want to increase our presence and make the market more aware of BlackRock. When you talk about Brazil and Mexico, these are the two largest pension markets in the region. Mexican pension regulator Consar allows local Afores to invest abroad but only through ETFs today. We hope that in future we can be part of that business. We have talked to the regulators and offered different solutions and I think eventually we can play that market as it opens up a little more.  In the case of Brazil, we are not there yet. It is the largest market in the region by far, concentrating 80% of the region's pension and mutual fund businesses. But I think we'll have to wait for that market to really open up. We have seen some changes such as allowing the Multimercado hedge funds to invest abroad. It's not just about regulatory issues in the country."

 

Challenge:  competing vs high local interest rates:

 

According to Blackrock:  "You also have a strong local equity market with high interest rates so investor appetite to invest abroad is very limited. People are really looking at the local market both in terms of equities and fixed income and of course, we think this will change in time. But we're not going to compete with local players. 

 

Market entry:  need for partners:

 

The pension business opening up would be a big opportunity for us. We can also team up with one of our global partners so that a portion of the mutual fund business is outsourced to international players and we'd like to be a part of that. In Brazil, we'd have to set up a full management company and this is something we might have in the future. But for now, we are talking with a lot of partners globally and seeing how we can engage in partnerships to penetrate the market.

 

 

 

 

Venture Capital Associations

 

Brazilian Venture Capital Association

 

About ABVCAP (www.abvcap.com.br):

Brazilian Association for Private Equity & Venture Capital (ABVCAP)

The ABVCAP was founded in 2000. It is a nonprofit institution geared toward the development, stimulus and dissemination of long-term investments in the real sector of the Brazilian economy, from investment and capitalization vehicles for companies, corporate projects and infrastructure in Brazil. Therefore, ABVCAP operates like a representative entity in Brazil for private equity and venture capital.

 

It is ABVCAP's mission to expand and improve the several long-term investment fronts in Brazil, in tune with the main international practices on the subject, when applicable to the Brazilian market and conditions. In this context, ABVCAP's mission stands out due to its strategic and essential integration with capital markets as a formulating agent and important driver and recycler of assets/companies on the stock exchanges.

For more information:

Monique Azeredo: ABVCAP Press Liaison

55 (21) 3970-2432 // mazeredo@abvcap.com.br

ABVCAP:  Associação Brasileira de Private Equity & Venture Capital

Avenida Rio Branco, 123, sl. 806

CEP.:20040-005 - Rio de Janeiro - RJ - Brasil

Tel: + 55 21 3970 2432

Fax: + 55 21 2292 5607

 

 

 

About LAVCA

LAVCA's mission is to promote the growth of the venture capital and private equity industry in Latin America through research, education, networking, best practices, and the advocacy of sound public policy. LAVCA is a not-for-profit trade association serving a core membership of venture capital and private equity fund managers.

 

For more information about LAVCA, please visit www.lavca.org.

partnership with Brazil:  http://www.lavca.org/lavca/allpress.nsf/0/22F827D6A517B6258625730C006B201C

 

 

 

About ABDI (www.abdi.com.br):

 

Brazilian Agency for Industrial Development (ABDI)

 

The Agency was founded in December 2004. Its mission is to promote Brazilian technological and industrial development by increasing competitiveness and innovation. ABDI's main focus is in the guidelines and strategies set forth by the Industrial, Technological and Foreign Trade Policy (PITCE) for which it is the coordinator, articulator and promoter.

 

For more information:  Marcia Oleskovicz: ABDI Press Liaison

55 (61) 3962-8700 // marcia.oleskovicz@abdi.com.br

 

road show to attract foreign investors: 

http://www.lavca.org/lavca/allpress.nsf/43119c4ae488f44886256fc800005ff2/d267cf8a8a23a6ed8625726800695bbf?OpenDocument

 

 

 

News:

 

At the start of the decade, just 135 incubators – buildings or studios set up for budding entrepreneurs, often linked to universities – had been set up in Brazil, while more than 400 exist today, according to the Brazilian Venture Capital and Private Equity Association (ABVCAP). The incubators are home to some 4,000 start-ups, according to the Genesis Institute, an incubator attached to Rio de Janeiro's Catholic University.

 

ABVCAP's president, Luiz Eugenio Junqueira Figueiredo, says that 15-20 venture capital (VC) groups now exist in Brazil and that they have raised between 500 million and a billion reais since the year 2000. "The average venture capital fund now being set up in Brazil seeks to raise 80 million to 100 million reais while five years ago it could only raise 20 million reais," Figueiredo says. "Many are now undertaking their second or third round of fundraising."  Figueiredo adds that it is hard to distinguish the exact sum of money that has been raised for VC from the amount secured for private equity (PE). Often the lines between the two are blurred, but VC investment tends to be smaller in size and at a much earlier stage in a company's formation than PE.

 

Figueiredo says that around 2% of Brazil's pension fund assets – which exceed $275 billion, according to ABRAP, the Brazilian Association of Pension Funds – is allocated to VC and PE today, up from only 1% a year ago. However, this proportion is still much lower than in the US, where pension funds allocate 6% to VC and a further 8% to PE.

 

Brazil's boom in VC is yet another manifestation of the new spirit of entrepreneurism that has infected the country. Other signs of this include last year's bumper crop of 64 IPOs, the leap in the capitalization at the Bovespa during the past five years, a surge in the number of high net worth individuals, emergence of domestic hedge funds, and the spread of share-ownership.  "Entrepreneurism is only now starting in Brazil," says Don Wood, managing director at DFJ, a VC network, whose only associate fund in LatAm is Brazil's Fir Capital. "Its VC industry is fledgling but we are encouraged by the country's strong economy, the vibrant IPO market last year, and the fact that it now has investment grade from two credit ratings agencies. The country has also made some new big oil discoveries and that can only make its future brighter."

 

Attack of the Clones

 

There are three stages in the development of a country's VC industry, according to Wood. The first is when firms are set up to tap a country's low cost labor force and seek VC. China and India are at this stage. The second phase is when companies are set up to clone businesses that have already been successfully developed in the first world. Many of them cater to the domestic market, are consumer-facing and in the retail sector. Brazil has entered this phase, says Wood.

 

The last phase – best exemplified by Silicon Valley in California – is when world-class companies are established, usually with breakthrough technologies. "The final stage is the riskiest but offers the biggest opportunities because it involves the most innovative companies," says Wood. "Brazil will enter that stage within the next five years."  The country is seeing clusters of technology companies set up around the best universities, particularly in São Paulo, Rio de Janeiro and Belo Horizonte. Brazil's equivalent of Silicon Valley will take shape in these geographic areas, says Wood. He adds that its most innovative firms leverage Brazil's strength in agriculture and are often found in the bio-technology and ethanol technology sectors.

 

For example, Fir Capital, the Belo Horizonte-based venture capitalist with $150 million in assets under management, has invested in a business called Safetrace, which has developed a pioneering platform to track animals' involvement in the food chain. The typical size of Fir's VC investments is $1-$10 million equivalent, and its main exit strategy is through strategic sale. "We have a time horizon of three to five years and often earn double-digit multiples on the original investment we make – sometimes we get up to 30 times of our initial investment back," says Fir's president Marcus Regueira.  Meanwhile, the IDB has helped nurture Brazil's VC industry and is using its success there to roll out a program for other LatAm nations. Since 1998, the IDB has invested $45 million in 13 VC funds in Brazil and has provided cash for local venture capitalists to be trained in the US. Early-stage companies received between $75,000 and $500,000 in seed capital from the  IDB and its venture capital partners in the country, and it claims that around 100 enterprises in Brazil have benefitted.

 

"Brazil is unique in Latin America. Its government has made a significant contribution to developing the VC industry," says Susana García Robles, senior investment officer at the IDB's multilateral investment fund. "It has a big competitive advantage in technology. Peru and Colombia are also developing a VC industry but they do not have this edge."  According to García Robles, Brazil's VC business is second only to India's in emerging markets for its vibrancy. "We have seen exits in at least 10 of the companies that we backed, and in most cases we have seen returns of at least three times the amount of the initial capital we invested since 1998, although in some cases the returns have been incredible," says the investment officer.

 

State Sponsorship

 

One aspect of Brazil that most distinguishes it from other LatAm countries is the role played by public bodies – mainly the BNDES and the country's ministry of science and technology – in kick starting VC. The ministry runs the Inovar program, which provides start-ups with the financial, management and technological support needed to make the businesses competitive. Furthermore, since 1967, it has spearheaded the Finep initiative, which promotes and finances innovation and technological research by enterprises and universities.

 

In the Latin American Venture Capital Association's (Lavca) annual scorecard, Brazil has the second highest ranking in the continent, with 75 versus Chile's 78. Argentina attains only 50, while Spain is slightly behind Brazil, at 74.  Brazil's overall score increased by 10 points during the last year, because of a continued expansion of funds under laws established in 2003 for fund formation and operation, aided by growing investment from pension funds in PE and VC.

Lavca also notes improvement in the enforcement of intellectual property rights and developments of capital markets.  In its latest scorecard, Lavca introduced an entrepreneurship indicator, which has helped Brazil, as it earned four out of a maximum of four points. Overall, Chile scores slightly better, because it enjoys marginally stronger institutions.

 

Angel Network:

 

Lupatech, LatAm's biggest valve producer and leader in precision casting, is a good example of a Brazilian enterprise that has reaped the rewards of VC. Founded in 1980 by CEO Nestor Perini and called Micro Inox, the company first received VC backing from CRP, the Brazilian VC group, in 1987. The business – headquartered in Rio Grande do Sul state – also secured rounds of PE investment in 1995, 2003 and 2005.  "Venture capital was vital for the development of the business," says CFO Thiago Alonso de Oliveira. "The most important factor for us was the management assistance and support that our VC backers gave us.

 

In parallel with the evolution of VC in the country, an angel network of investors has sprung up throughout Brazil. Many of these have themselves created businesses and know the benefits of receiving a loan or equity investment when starting a company. The angels have set up their own websites, work with incubators and universities, and provide entrepreneurs with capital from 100,000 to a million reais.  "We provide an incubator, an accelerator so that companies can grow really quickly. Some 40,000 business people in Brazil benefit from all the incubators in the country and the number of them is growing exponentially," says José Alberto Aranha, president of the Genesis Institute.

 

Some 80% of the companies in incubators turn out to be successes, says Aranha. One of the main exit strategies for the angel investors is via mergers of several incubated companies.  Brazil needs to improve in a number of ways before VC can begin to rival the size of the sector in the US. For example, Wood says the country still has issues relating to personal safety, quality of infrastructure, and standards of public secondary education. Pension funds must also cast off their conservative modus operandi and aggressively invest in VC.

 

"What is really needed is a few big success stories in Brazil, when its Skype or its Google emerges – that will be a huge fillip to the aspirations of entrepreneurs," states Wood.  More than any other LatAm country during the past few years, Brazil embraces a new entrepreneurial spirit. The emergence of a dynamic VC sector is one of the best illustrations of the creative energy being unleashed.

 

 

Blackstone prepares Brazil fund

Blackstone Group is gearing up for a $675 million fund set to invest in Brazil, contributing $500 million of its own capital. The fund will invest in infrastructure, civil construction, food, health and education. Reuters (01/25)

 

Schwartzman said global market turbulence was not affecting its Brazilian plans or its ties with local partner Patria Investimentos, which already has two funds in Latin America's largest country

 

 

The new face of private equity

Dec 6th 2007

The future of a controversial business lies with people such as Antonio Bonchristiano

 

GP Investments
 

 

 

Nobody has accused Antonio Bonchristiano of undermining his business model by taking his company, GP Investimentos, public a year before Blackstone's initial public offering (IPO). Even after recent wobbles, as the woes of the global financial system reached the emerging economies, the shares of Brazil's biggest private-equity firm are trading at nearly three times their IPO price. And whereas Blackstone's IPO was, in part, about creating a way for Mr Schwarzman and other executives to cash out some of their stake in the firm, the money raised by GP was to invest in what Mr Bonchristiano, its co-head, calls a big opportunity for private equity in Brazil and much of Latin America. “None of the money went into our own pockets,” he says.

 

The hiatus in private equity in America and Europe is likely only to accelerate the move already under way within the industry towards the emerging economies. It is a shift that Blackstone is helping to lead, having sold a stake in itself to the government of China. Carlyle, another venerable American private-equity firm, has recently raised a fund to invest in Latin America. Yet increasingly it will be domestic private-equity firms that take the lead and get the best local deals—and it will be Mr Bonchristiano and others like him who succeed Mr Schwarzman as the new faces of private equity.

 

Still barely in his 40s, Mr Bonchristiano, the son of a lawyer and raised in São Paolo state, combines expertise on Brazil's economy with foreign experience and a global perspective. In his mid-teens he was sent to school in England, and then went on to read politics, philosophy and economics at Oxford. He worked in the City of London for Salomon Brothers, then joined a boutique investment bank that focused on mergers and acquisitions involving Portuguese and Spanish firms. He returned to Brazil in 1993, just as the country was enjoying one of its periodic false economic dawns, and found a job with GP, Brazil's first private-equity firm, which had just been launched by three bankers. In 2003 the founders agreed to sell the firm to Mr Bonchristiano and his co-head, Fersen Lambranho.

 

The two men operate as genuine co-leaders, sitting next to each other in an open-plan office. Mr Lambranho, in his mid-40s, has more of an operating background and focuses on finding deals, while the polished, multilingual Mr Bonchristiano takes the lead on relationships with foreign partners and fundraising. He has been spectacularly successful. GP has just closed its fourth fund, by far its biggest at $1.3 billion. It was raised exclusively from international investors (40% American, 40% European, and 20% Asian and Middle-Eastern, including one of the suddenly ubiquitous sovereign-wealth funds). Mr Bonchristiano will surely soon be fund-raising again, as already, since July, GP has invested over 40% of the $1.3 billion in three deals.

 

An awful lot of opportunities in Brazil

 

International investors are increasingly excited by Brazilian private-equity. As well as recognising it as one of the leading emerging economies (or BRICs, along with Russia, China and India), investors have growing confidence that Brazil has finally overcome its macroeconomic instability. Furthermore, private equity in emerging economies such as Brazil tends to focus on growth and operating improvements, and does not rely much on leverage—an advantage at a time of tight credit markets. Better still, there is less competition in private equity in Brazil, compared with other big emerging economies. Mr Bonchristiano says there are about 400 private-equity firms in India, half a dozen in Brazil and half a dozen in the rest of Latin America.

 

Meanwhile the Brazilian IPO market has become one of the hottest in the world, with around 70 flotations likely this year, up from 24 in 2006 and none in 2003, according to Dealogic. GP has made some lucrative exits, including the IPOs of Gafisa, a homebuilder; Equatorial Energia, an electricity utility, which made GP 33 times its money; and Submarino, a Brazilian equivalent of Amazon. In 1999 Mr Bonchristiano briefly left GP to run Submarino, and successfully navigated the internet bubble, not least by tightly controlling spending. GP eventually made ten times its money on its stake in the company.

 

GP now faces two big tests, Mr Bonchristiano says. The first is to manage growth. It already has 50 staff, including 15 professionals. Its next fund will probably be bigger. It has just opened an office in Mexico, where he sees similar opportunities to Brazil. The second is the “general external environment”, particularly the credit crisis and a potential economic downturn in America. The main reason to go public was to raise “permanent capital” to enable GP to invest in gloomy markets as well as good ones. If there are bad times coming, says Mr Bonchristiano, “we have been there before and survived.” A third test, which he does not mention, will be to compete with Mr Schwarzman and his ilk as the big foreign firms move into Brazil. GP will have the advantage of its local connections, of course. But will that be enough?

 

read more...

 

 

 

 

Links from KooyPlan:  see also:

 

 

 

External Reports about PE / VC in Brazil:

Private Equity & Venture Capital Analysis of Brazilian Industry

30/01/2008. This Monitor Group/ABVCAP study provides an overview of the private equity and venture capital activity in Brazil.

Brazilian private equity market survey

04/05/2004. After two consecutive years of a declining trend, the value of private equity and venture capital investment in Brazil increased by 32 per cent in 2003, according to the Brazilian Venture Capital Association. A total of 54 companies received $451m last year, compared with $342 in 79 companies in 2002.

The Mae is dead! Long live the Mae!

13/06/2003. Prospects have improved considerably for Brazil's energy sector since the government replaced the self-regulating Mercado Atacadista de Energia (MAE) with a new government- controlled entity last year, according to Matthew Fowler of Coudert Brothers. Governmental reorganisation of the company and the market conditions that govern it have created a fertile energy sector but it remains to be seen if the reforms will translate into a sustainable regulatory framework for Brazil's wholesale energy market.

Brazil Venture News Issue 19

14/02/2003. The figures for venture capital and private equity activity in Brazil for 2002 confirm the lacklustre year for the country in this arena. Private equity firms invested $164m in 34 deals last year, which represents a reduction of 76 per cent in dollars invested and 50 per cent in number of deals compared to 2001. This poor performance could be attributed to a delay in implementing investment plans by private equity firms and portfolio companies and the high volatility of foreign exchange rates, according to Stratus Investimentos.

Brazil Venture News Issue 18

21/01/2003. The Brazilian government, elected in October 2002, has already shown its support for the country's venture capital community by expressing a need for greater development of capital markets. Such support is not expected to cause an immediate surge in venture capital activity but it does have positive implications for the future, says Stratus Investimentos.

A prescription for building a venture capital industry in Brazil

11/12/2002. Brazil has slowly been opening its doors to venture capital since the mid 1990s. In the intervening years, the industry has become increasingly professional. Robert Binder of the Brazilian Venture Capital Association charts the rise of the industry in Brazil but argues that more must be done to ensure its future success.

Brazil venture news

27/09/2002. The first half of 2002 showed a marked decline in the Brazilian venture capital industry when compared with the previous year. But there are some positive signs with a natural selection process now occurring in the country, according to Stratus Investimentos. There are fewer funds, more experienced and committed teams, and possibly more deals.

Brazil venture news

27/09/2002. There has been a continued global decrease in investments in the private equity industry in recent months. Stratus Investimentos highlights the most interesting figures and places Brazil within this context.

Brazil venture news

13/08/2002. Fundraising in Brazil took a dramatic downturn in 2001. The positive aspects, such as the removal of important restrictions for local institutional investors, were far outweighed by the negatives. The crisis in Argentina, the international macro-economic uncertainties, the performance of existing venture capital funds and the extended regulatory transition of the local pension funds industry all helped to accelerate the decline, according to Stratus Investimentos.

Impact of recent legislative developments on private equity investments in Brazil

12/08/2002. Venture capital investment relies strongly on the quality of rights of minority shareholders of the target company and the quality of corporate governance standards as a whole. The easier the enforceability of shareholders' rights, the more transparent the management of the company will be and the friendlier the environment for private equity investments. Augusto Cesar Barbosa de Souza of Vieira, Rezende, Barbosa e Guerreiro examine how far Brazil has developed laws to encourage foreign investment.

Brazil Venture News Q1 2002

28/05/2002. Almost half of investment firms in Brazil are currently managed by international players. However, macroeconomic uncertainties and the September 11th attacks have slowed foreign activity in this region. This is according to the Stratus monthly newsletter.

Brazil Venture News

07/03/2002. Investment activity in venture capital remained steady in Brazil throughout 2001, according to Stratus. However, the outlook for 2002 is still uncertain with investment activity probably being influenced by an uncertain political situation and macro-economic developments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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