Financial investors are the first to take advantage of market activity resumption, say bankers
07/20/2023
Private equity funds, which buy stakes in companies, have already sold more than R$3 billion in shares on the stock exchange this year, among block trades and secondary offerings, despite the volatility in the markets, especially in the first quarter of the year. According to investment bankers, financial investors are historically the first to take advantage of the resumption of capital market activity.
Pátria has been one of the most active in divestments in 2023. The manager sold in two tranches stakes in the Smart Fit gym chain: the first through a block trade, raising R$225 million, and the second in a stock exchange offering in June, with another R$591 million.
Agribusiness company Lavoro raised R$544 million on Nasdaq in an IPO (capital increase for the company). Last week, it completed the sale of a portion of its stake in Hidrovias do Brasil, raising R$441 million. In total, the operations amounted to R$1.8 billion.
“I understand that there is a pent-up demand for equity offerings. There is a large pipeline of operations in the market. As private equity funds have participated in the vast majority of IPOs in recent years, they will naturally be very active in secondary offerings as well,” said Ricardo Scavazza, partner at Pátria and private equity CEO at one of the largest managers in the country.
Mr. Scavazza sees Patria as one of the protagonists in this process in the coming months. According to him, the manager has more businesses that are expected be divested over the next few months, either partial or total sales, which are still structured, in the private market and listed companies.
Another operation that stirred the market in the first half of the year was the beginning of Goldman Sachs’ exit of Oncoclínicas. According to sources who followed the transaction, the offer also had the goal of injecting more liquidity into the company’s securities with the objective behind of helping to unlock value in the stock.
The number still includes sales of XP shares by investment holding company Itaúsa this year. A stock exchange auction of XP shares in early June, and a second on Wednesday, which raised approximately R$600 million, leaving Itaúsa closer to saying goodbye to the brokerage. Although not a classic private equity fund, Itaúsa buys stakes in companies.
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Piero Minardi — Foto: Silvia Zamboni/Valor
Private equity funds have always been drivers of stock offerings, said Piero Minardi, head of Warburg Pincus and advisor to the Brazilian Private Equity and Venture Capital Association (Abvcap). “After the volatility due to the 2022 elections in the country and the uncertainties at the beginning of the year about the direction of the economy here and abroad, I believe that there will be a resumption of the capital market,” he said.
For Mr. Minardi, it is still difficult to predict the speed of expansion, but he believes that the alignment of Congress in relation to tax reform and the fiscal framework may accelerate this process. “Private equity funds are the first to look for exits, since there is also a deadline set by the investment cycle itself,” he said. This year, WP and Gávea sold in April, through a block trade, R$530 million in shares of GPS, a services company, such as security and logistics.
According to a survey by Abvcap, of the 28 IPOs in 2020, for example, half were from private equity investees. In 2021, of the 46 IPOs, 18 were from fund portfolio companies. From 2022 to this year, companies did not make IPOs on the Brazilian stock exchange.
With the cycle of recovery, the natural movement begins with the operations of secondary offerings, and then with the IPOs. Future IPOs, he said, are expected to raise larger amounts, regardless of the sectors of operation of the companies that go to the stock exchange. “In the recent past, we have seen strong demand for companies with growth potential. We will now see a focus on companies that can generate cash and value to their business,” he said.
Marcos Camilo, specialist in M&A and capital markets and partner at Pulse Capital, said that, historically, about 70% of IPOs are made by companies that have private equity funds as an investor. For this year, according to him, as the window for going public remains closed, the executive also sees more funds selling their investments to other funds, operations called “sponsors to sponsors”.
*Por Fernanda Guimarães, Mônica Scaramuzzo — São Paulo
Source: Valor International