Latin Finance - January/February 2011 - 43

DEALS of the YEAR
2010

based IT service company, bought a 55% stake in IT services company CPM Braxis for 517 million reais in September. It was valued at around 7x-8x Ebitda, the banker says. Apax plans to hold Tivit for four or ﬁve years, the average time it usually keeps its portfolio companies, says Wright. “Our goal really is to increase the size of the company and to grow it organically and inorganically,” Wright explains. “We are bringing Apax’s M&A expertise to help the company be more aggressive in its pursuit of acquisitions,” says Wright. “The acquisition pipeline at Tivit has increased and the Apax team is working directly with Tivit in identifying new opportunities,” he adds. In October it hired André Guimarães, previously of Merrill Lynch and Pátria Investimentos, as director of M&A and strategic planning. Besides relying on Apax to build its M&A pipeline, Tivit is also working with external ﬁnancial advisors. “Our acquisition of Tivit was very high proﬁle in Brazil so many of the important advisors in the country have reached out to us with other opportunities for Tivit,” Wright says. “They are bringing deals to us.” A partner at a Brazil-based M&A boutique says he has several potential targets. “Tivit will acquire mid-sized companies such as call centers and enterprise resource planning ﬁrms with revenues of up to 300 million reais per year,” he adds. Tivit is targeting companies that will help it expand its services and increase exposure to more business lines, Wright says. “Tivit has been very strong in ﬁnancial services and manufacturing,” Wright explains. “There are opportunities for us to get more exposure to additional business segments within Brazil. We want to get deeper into verticals we are already in and expand to other areas such as mortgage processing.” Opportunities for growth are abundant. According to research ﬁrm Gartner, Brazil represents 47% of the LatAm IT services market, valued at $23 billion. Driven by a booming economy, the Brazilian IT services market has enjoyed

the highest growth rate in the region for the past ﬁve years. Yearly growth should exceed 10% until 2014, Gartner says. Wright says Tivit will seek acquisitions mainly in Brazil. It has also considered targets in other LatAm countries and will continue to do so. Apax is also looking for opportunities in other sectors beyond technology. “All ﬁve of Apax’s industry teams – tech/ telecom, media, healthcare, retail/ consumer and ﬁnancial/business services – are now in Brazil looking for acquisition opportunities,” Wright says. LF

Equity Follow-On
Petrobras

ove it or hate it, there was no avoiding the giant, black, viscous elephant in the room of LatAm equity last year. Petrobras’ $70 billion raise was the biggest equity sale ever, though some claim that since the true public market portion was “only” about $20 billion, it is merely the LatAm champ. There may have been less contentious follow-ons, like Banco do Brasil, or Petrobras Shares Versus Bovespa others performing The elephant drags down prices better in the after market. Petrobras 50 was great if you were Bovespa the government, 45 annoying if you were a minority 40 shareholder. But few could question its 35 signiﬁcance during an election year for a 30 country that is now PN ON ﬁrmly on the global 25 investor map. “The stakes had 20 never been bigger, Jul-2009 Oct-2009 Mar-2010 Jul-2010 by a wide margin,” says Gregg Nabhan, Source: Economatica vice chair of global
Petrobras, BRL

The $70 billion Gorilla L

ECM at Bank of America Merrill Lynch (BAML). “This transcended size, fees, and league tables. This was a highly impactful event with regard to the political economy in Brazil, and Brazil’s perception in the world.” BAML was a global coordinator on the transaction. There were many interests to balance. Euphoria about the Brazil oil ﬁnds over the past decade has led naturally to a realization that a signiﬁcant chunk of funding is required for the more than $200 billion needed to recover pre-salt deposits. Shareholders would be diluted, and the company will need to take on $60 billion in debt. The government needed a high average price on rights to ﬁve billion barrels worth of oil reserves, to look strong heading into October elections. Investors balked at the $8.51 price, hoping for a value closer to $6.00. “To the extent that the spirit of the Brazilian corporate law was in our view not followed . . . this is always a good reminder for investors that risks exist in buying equities in Brazil,” said UBS, one of only a few global investment banks not participating in the underwriting. In the end, demand came through, with the transaction 50% oversubscribed. The state-controlled oil producer priced 2.40 billion ordinary shares at 29.65 reais each and 1.87 billion preferred at 26.30 reais, to raise 120.36 billion reais.

80,000 70,000 60,000

IBovespa, points

50,000 40,000 30,000 20,000 10,000 0 Nov-2010

January/February 2011

LATINFINANCE 43

Latin Finance - January/February 2011

Table of Contents for the Digital Edition of Latin Finance - January/February 2011