ie mba application_elaine salvador
TRANSCRIPT
H. WHAT DO YOU BELIEVE ARE THE GREATEST CHALLENGES FACING THE SECTOR OR INDUSTRY YOU WOULD LIKE TO SPECIALIZE IN AT IE? WHAT ROLE DO YOU HOPE TO BE ABLE TO PLAY IN THIS SECTOR OR INDUSTRY IN THE MEDIUM TERM?
6 years in Invesment Analysis
WHERE HAVE I BEEN WORKING IN?
My experiences Opportunities
Challenges
• Brazil is a land of opportunities• Low professionals with experience• Middle Market with low acces to capital
• Few funds dedicated to middle market• Long way to close a deal• Familiar and informal Companies• Dependence of Taxes Incentive
5 years in Private Equity
3 years in an International
Fund
2
1. OPPORTUNITIES
LATIN AMERICA OVERVIEW
High Growth rates, huge consumption market, political environment establishment and opportunity to increase the Credit/GDP and Investment/GDP
4
Brazil – Major Statistics (1)
Area 8.5 million km2
Population 200 million
GDP (2014) 2.25 USD Trillion
Real GDP CAGR (2004-2014) 3.5% yoy
Inflation CAGR (2004-2014) 5.3% yoy
Middle Market Companies(3) 60,111
(1) IBGE, Bacen(2) Capital IQ (BRL/USD)(3) IBGE definition: companies with 50 ~ 249 employees.(4) JPMorgan
FX Rate(2)Brazilian PE Activity Overview
Largest economies by GDP (5)
(5) World Bank - 2013(6) Mergermarket (7) KPMG
WHY AM I CHOOSING BRAZILIAN MARKET?
(6)
5
WHY BRAZIL CAN BE GOOD FOR PRIVATE EQUITY INDUSTRY?
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Healthy Institutional Foundations
Large,Rich Country
Growing Middle Class and Credit
Expansion
Attractive environment for mid-market PE
FavorableCapital Markets
Conditions
PRIVATE EQUITY FUND’S OPPORTUNITIES:
Brazil has a limited number of listed companies...
...and public market is restricted to larger companies... ...with larger offerings even compared to developed countries
Market for public offerings has been frozen since 2007
Source: Factset
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Capital Markets are not an option for most Middle-Market Companies in Brazil
2. CHALLENGES
Micro caps/ Venture Capital
91.8%
1.2%
6.7%
0.3%
% of total CompaniesSize % of capital available
6.7%
87.2%
LargeCompanies
Mid-sized Companies
Small Companies
Very competitive Advised by bankers
Low competition Limited financial advisory Mostly proprietary deals
Competitive
6.2%
Funds
FEW FUNDS FOCUSED IN MIDDLE MARKET COMPANIES 9
Initally Screened Investment Comitee
2nd stageanalysis
Non-BindingOffers
Initally Screened NDAs signed Team put on IC’s radar IC Approval
Setor #
Food 9%
Manufacturing 6%
Logistics 5%
Education 5%
IT 5%
Others 70%
InvestmentCommittee
1st stage analysis
Non-binding Offers
Executed LOIs
Setor #
Education 8%
Apparel 7%
IT 6%
Healthcare 5%
Food 5%
Others 70%
Setor #
Education 11%
Software 8%
Apparel 6%
Media 6%
IT 5%
Others 65%
Executed LOIs
Setor #
Education 11%
Media 7%
Apparel 7%
Software 5%
Healthcare 5%
Others 64%
Setor #
Software 13%
Media 13%
Food 13%
Education 9%
Chemicals 4%
Others 48%
IT IS DIFFICULT TO CLOSE A DEAL 10
~1% of total companies analized become a LOI executed
Informality - Mid Size Companies
DEVELOPING MARKET WITH INFORMAL COMPANIES
Informality - Mid Size Companies
11
37%
63%
InformalityFormal Companies
Source: PNAD; Ministério da Fazenda
Region Tax Incentive
North ICMS -Reduction from 70% to 90%
Northeast ICMS - Reduction from 70% to 90%IRPJ - Reduction of 70%
Midwest ICMS - Reduction of 73%
Southeast ICMS -ES and RJ Reduction of 73%
South ICMS -SC and RJ Reduction from 70% to 80%?
• It is very difficult to measure the amount of Brazilian informal enterprises. The latest study of the PNAD estimated that about 40% of mid-size companies presented some informality, although other institutes argue that this number can be higher.
• Furthermore, most companies only come to formality if they can achieve any tax incentive. These companies do not generate operating profit but they can generate cash flow with temporary tax reduction.
4. PRIVATE EQUITY PROFESSIONAL’S PROFILE
WHAT ROLE DO I HOPE TO BE ABLE TO PLAY IN THIS SECTOR OR INDUSTRY IN THE MEDIUM TERM?
To work as an entrepreneur, feeling like the owner of the business, will make me a more prepared professional to deal with the unexpected such as: changes in taxes and laws, companies with few financial information, informality, etc.
What is Important for a Private Equity Professional?
Ability to handle the unexpected
To be able to analyze different types of industries. To identify low-hanging fruits and have the capability to plan a long-term strategy with good returns for both the Fund and the Entrepreneur.
Management and Financial Skills
To be able to balance the interests of sellers and buyers, and to close a deal with people from different perspectives and backgrounds.
Soft skills and negotiation capability
Increasing my knowledge of Brazilian and International market practices will enable me to analyze an investment and to measure the progress of a particular industry for the following years.
Knowledge of Business Practices
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4. WHY IE?
THE ROLE OF IE’S IMBA IN MY PATH 15
Recognized MBA brand
IE’s excellence
• The importance of formal education in both my professional and personal life;• IE’s recognized brand will open doors: expansion of my knowledge base, contact
with the best professionals and key international companies.
• Skills and Knowledge acquisition in a diverse environment, which favors the entrepreneurial mindset;
• At IE I can achieve Domain Expertise; Leadership Ability and Personality Development.
IE’s alumni • Consolidated business network: I will meet and interact in a relevant manner with colleagues, professors and teaching staff;
• Exchange of different perspectives, diverse experiences, access to opportunities only IE’s alumni can provide.
IE’s international environment
• Gaining insight into international markets will bring me a different overview of the business world;
• Opportunity to gain perspective of the Financial Industry in different countries.