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IE MBA Application_Elaine Salvador

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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?

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IE MBA Application_Elaine Salvador

  1. 1. 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?
  2. 2. 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
  3. 3. 1. OPPORTUNITIES
  4. 4. LATIN AMERICA OVERVIEW High Growth rates, huge consumption market, political environment establishment and opportunity to increase the Credit/GDP and Investment/GDP 4
  5. 5. 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
  6. 6. WHY BRAZIL CAN BE GOOD FOR PRIVATE EQUITY INDUSTRY? 6 Healthy Institutional Foundations Large, Rich Country Growing Middle Class and Credit Expansion Attractive environment for mid-market PE Favorable Capital Markets Conditions
  7. 7. 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 7 Capital Markets are not an option for most Middle-Market Companies in Brazil
  8. 8. 2. CHALLENGES
  9. 9. Micro caps/ Venture Capital 91.8% 1.2% 6.7% 0.3% % of total CompaniesSize % of capital available 6.7% 87.2% Large Companies 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
  10. 10. Initally Screened Investment Comitee 2nd stage analysis Non-Binding Offers 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% Investment Committee 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
  11. 11. Informality - Mid Size Companies DEVELOPING MARKET WITH INFORMAL COMPANIES Informality - Mid Size Companies 11 37% 63% Informality Formal 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.
  12. 12. 4. PRIVATE EQUITY PROFESSIONAL’S PROFILE
  13. 13. 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 13
  14. 14. 4. WHY IE?
  15. 15. 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.

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