Gustavo Flausino Coelho
Bastilho Coelho Advogados, Rio de Janeiro, Brazil
gustavo@bastilhocoelho.com.br

Co-Chairs

Paulo Coelho da Rocha
Demarest Advogados, São Paulo, Brazil; Secretary, Latin American Regional Forum

Mercedes Rodriguez Giavarini
Mitrani Caballero & Ruiz Moreno, Buenos Aires, Argentina; Latin American Regional Forum Liaison Officer, Closely Held Companies Committee

Speakers

Geert Aalbers
Control Risks, São Paulo, Brazil

Maria Tereza Azevedo
Softbank Investment Advisers, São Paulo, Brazil

Camila Goldberg
BMA, Rio de Janeiro, Brazil

Bill Parish
White & Case, Houston, Texas, United States

Antonio Pena
Greenberg Traurig, Miami, Florida, US; Junior Website Officer, International Commerce and Distribution Committee

Introduction

The panel began by discussing the impact of the pandemic and the changes it has caused. Despite the tragic effects of Covid-19, it is possible to identify a positive legacy to private equity and venture capital in the aftermath of the pandemic.

Market trends

Speakers discussed the impressive developments of the last two years: the record number of Initial Public Offerings (IPOs), the boom of Special Purpose Acquisition Companies (SPACs), an increase of M&As, and an abundance of capital to fund companies. Nevertheless, this reality has shifted to short-term investment and affected non-profitable businesses which would have attracted long-term investors.

Panellists believed that correction to these trends is now imminent. This is due to the increased cost of capital, as investors prefer profit to unprofitable growth.

The positive perspective of the panellists led to the statement that 2023 will be the best year of venture capital investment, with opportunities to invest in Fintech, SaaS (Software as a Service) and proptech companies in Latin America.

The change in perspective may result in down rounds and the reduced valuation of the invested companies, based on the market correction, and develop corporate venturing.

ESG

There is currently a significant emphasis on environmental, social and corporate governance (ESG), with investors looking at the level of maturity of the sustainability practices to guide investment decisions.

In Brazil, the authorities are still trying to establish guidelines and disclosure requirements for public companies, in order to provide better market information and to fight greenwashing. Privately held companies have no mandatory requirement to disclose information relating to ESG to third parties, leading to information irregularity for investors.

The panellists connected the ESG discussion to compliance, stating that ESG is the new compliance, often demanded by the private equity funds.

IPO

Despite the major correction in pricing and the other challenges, the necessity of companies to raise money persists. Consequently, intense activity is expected in 2023, with several IPOs and pre-IPO private rounds in Latin America. However, considering the more selective market, investors will apply a more thoughtful decision process.

Investment in technology and cybersecurity

Technology is central to today’s world and, of course, to investors. Tech companies will unlock opportunities with artificial intelligence and continue to challenge current legal frameworks. Pro-innovation regulation is expected to ease the growth path of the tech-focused businesses.

The panellists also addressed the topic of cybersecurity. According to Geert Aalbers, the three key risks on the radar are the increasing amount of: (1) ransom attacks; (2) state-sponsored attacks; and (3) reputational damages caused by hacktivists. These risks underline the need of cyber due diligence by investors and constant monitoring by the companies.

Conclusion

The dynamic panel contributed to a most enjoyable session, with updates and inspiring notes from panellists and co-chairs. To summarise, Maria Tereza Azevedo emphasised that the balance of power had shifted to the investor; and that there will be funding for good companies.