Tuesday, June 28, 2011

PRAHL Michael, ZEISBERGER Claudia
Brazilian Private Equity: Moving Centre Stage
INSEAD Working Paper 2011/74/DS
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This report provides an overview of Brazil’s private equity industry, discussing its history, current status and outlook. It draws on surveys of leading limited partners (LPs or investors) and general partners (GPs or PE firms) who are currently investing or intend to invest in the Brazilian private equity (PE) industry. The INSEAD-PwC Private Equity Survey was conducted from February to April 2011 among 15 GPs from across the region and 10 LPs investing or considering investing in Brazil. The first part of the report offers an introduction to Brazilian private equity, starting with a summary of its historical evolution and followed by a discussion of recent developments in the industry, including the increasing flow of funds into this asset class. It then takes a look at the current market situation from both the GP and LP perspectives in terms of investment strategies and fund raising trends, seen in a context of growth, minority investing, and change resulting from the entrance of international buy-out funds into the market. The core of the report focuses on the investment outlook. It analyzes investors' perspectives on the country and discusses the new pools of capital (domestic and international)feeding the growth of the industry, as well as the historic returns on private equity investments, which have been achieved with very limited leverage given the high cost of debt. It assesses expected future returns given the interplay between great investment opportunities and increasing competition among PE funds. Conditions for continued growth in the PE industry - the emerging consumer society, the recent development of capital markets, and a high level of fragmentation in several sectors - are laid out, as are the main challenges faced by LPs and GPs investing in the country.