TTR DealMaker Q&A with TozziniFreire Partner Francisco Eumene Machado de Oliveira Neto

TozziniFreire Partner Francisco Eumene Machado de Oliveira Neto advises companies and investors, both domestic and foreign, having broad experience with publicly-held organizations and financial institutions. His practice is focused on corporate, civil and commercial legal matters, such as banking and capital markets transactions, private equity deals, purchase and sale of companies and corporate restructuring.

TTR: Though Private Equity deals took center stage in Brazil in 2018, outpacing aggregate value and deal volume of the previous four years, 2019 has not been great so far for PE investment, falling behind activity for corresponding periods in 2017 and 2018.  What market conditions explain this scenario? What can we expect for the remainder of 2019?

After many years governed by the same political party, a new president – from an opposing party – was elected. After the initial excitement, the market is waiting to see the ability and power of the new president to implement the changes the country needs. The lack of visibility on the outcome of the main reforms is probably helping the market to hold off new investments and reducing the number of deals. Depending on the political developments, we can expect equity, debt and private equity deals to increase substantially for the remaining of the year.

TTR: What’s your outlook for the Brazilian Capital Market in 2019?

The outlook for 2019 is positive. Despite the cautiousness of the market at this point, the approval of the social security reform and the implementation of privatizations and sale of certain governmental assets in the following months will likely boost the capital market this year and for the years to come.

TTR: Technology and Financial sectors led M&A transactions in Brazil in 2018 and are already at the forefront in 2019. What do you make of these trends and how do you expect these two sectors to perform in the coming months and why?

Technology sector has led and will lead the number of M&A transactions for the near future. Traditional companies are continuously investing in new technologies and adapting its business model to this new reality and new ones are already being created heavily supported by technology, which makes an excellent scenario for M&A transactions.

The financial sector has seen some large transactions in the past years and smaller ones mostly related to fintechs. The fintechs are opening the market to a larger number of investors by creating a new environment for doing business. The Brazilian Central Bank also took part and enacted a new law to regulate some of these new companies. It is expected that many of these fintechs will continue their growth by raising more capital, developing new products and acquiring smaller ones. The large banks are also very close to these developments and are likely to play an important role on this market.

TTR: Santander Brasil recently completed the acquisition of card processor Getnet after buying the 11.5% stake in the company it didn’t already own for BRL 1.4 bn. What does this deal tell us about the Brazilian financial market and the level of competition in the card processing segment?

Santander’s acquisition consolidated the full control over Getnet. It was part of a process initiated in 2014. The card processing segment has shown its importance and the competition is fierce. More recently, companies not related to financial institutions have entered the market with successful equity offerings carried out outside of Brazil.

TTR: What were the main challenges you faced advising on this transaction?

Even though the exit of the former controlling shareholders was established since Santander’s first acquisition, the confidentiality of the transaction was crucial during the negotiations of the remaining pending issues.