Brazil private equity reaches critical mass, but many opportunities untapped

Private equity opportunities for UK investors in Brazil have never been better, but remain relatively untapped, according to a report published today.

UK Trade & Investment (UKTI) commissioned Peter Thorpe, Associate Director at financial services group Smith & Williamson, to research the market during a four-month secondment to UKTI’s team in Brazil.

Mr Thorpe commented:

“The scale and stability of Brazil’s economy, which accounts for over half of South America’s GDP, are generally recognised. But there is a wider story, and it shows that there has never been a better time for investors to look at private equity in Brazil.

“Private equity in Brazil remains relatively low at just 1.7 per cent of GDP. Investors should consider factors like the dramatic rise of millions of Brazilians into lower-middle and middle income brackets, the government’s ambitious programme of infrastructure development, and the large number of untapped mid-market companies.

“There is a massive scope for the consolidation of fragmented industries in Brazil, while regulation and transparency affecting private equity surpass the other BRIC nations, not to mention some major developed countries.”

Publication of the report follows closely on Business Secretary Vince Cable’s relationship-building visit to Brazil, during which he made clear that trade and investment between the two countries shows great untapped potential.

The UK’s status as a pioneering financial hub, its broad pool of expertise, access to capital markets and its time zone advantage offer the UK a comparative advantage in entering the sector in Brazil.

Brazil private equity in numbers, from today’s report:

• The Emerging Markets Private Equity Association 2010 survey found that Brazil should see the largest increase in new investors of all emerging markets over the next two years.
• Brazil’s GDP per capita more than tripled from US$2,638 in 2002 to US$8,626 in 2008.
• At 30 June 2008, capital committed to Brazilian private equity represented just 1.7 per cent of GDP, compared to a world average of 3.7 per cent and a UK figure of 4.7 per cent.
• The average private equity investment in Brazil over the period 2005 to 2008 was US$45 million. Indications suggest that the average deal size has risen to closer to US$100 million since the onset of the global downturn.

Peter will present the report at a seminar today at Mansion House co-hosted by the Lord Mayor of London and the Brazilian Chamber of Commerce in London.

Media contact

For more information, for embargoed copies of the report, or for interviews with the report’s author, please contact Susan Grieve in UKTI Press Office on 0207 215 4644 or susan.grieve@ukti.gsi.gov.uk

Brazil Factfile

• The last 3 years have seen a 500% increase in the number of British companies coming to UK Trade & Investment for help with the Brazilian market.
• Brazil is the fifth largest country in the world - bigger than the entire European continent.
• Brazil is larger than the continental US and Australia and borders every South American nation except Chile and Ecuador.
• Brazil is the 3rd largest producer of space satellites.
• Brazil is the world leader in bio-ethanol production. More than three-quarters of the automobiles sold in Brazil have flex-fuel engines, capable of running on petrol, ethanol, or a mixture of the two.
• Brazil has the best science base outside the G8.
• 400 of the world's 500 biggest companies operate in Brazil.
• Of the 500 largest corporations of Latin America, 300 are Brazilian.
• Brazil is the world's fifth biggest consumer market.

Disclaimer

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Notes to editors

About the Author

Peter Thorpe is an associate director in the assurance and business services department of top 10 accountancy firm Smith & Williamson. At Smith & Williamson, his client base is focused primarily on small and mid cap Main Market and AIM listed companies, as well as owner-managed and private equity backed businesses.

Smith & Williamson is an independent professional and financial services group employing around 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Salisbury, Southampton and Worcester.

Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International

Smith & Williamson Corporate Finance Limited
Authorised and regulated by the Financial Services Authority
A member of the London Stock Exchange
A member of M&A International

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