Brazilian private equity market still full of lucrative opportunities

26 October 2017

Brazil remains a strong candidate for private equity firm investment, according to a new study from BCG. The country, which is projected to experience steady growth in the coming years, has a relatively mature market with a low level of penetration.

The private equity industry has seen stellar growth over the past decades, with wealth under its management having grown to $3 trillion globally, while the number of firms active in the sector has exploded to more than 4,700.

A new report from The Boston Consulting Group (BCG) considers opportunities for the industry in Brazil. The report is based on the firm’s recent analysis into the Brazilian economy.

Economic boom

Market dynamics

Brazil enjoyed near-explosive growth between 2001 and 2011. The country's economy rose from the world’s 11th to 6th largest, on the back of consumer debt and workforce expansion. Since 2013, however, the country fell into a period of protracted decline, punctuated by a series of political scandals and crises. As it stands, the country has all but run out of the fuel that saw its initial growth spurt, and continues to be hammered by lower global commodity prices. As a result, growth is set to remain relatively modest at 1.8% till 2021.

In terms of growth by industry, a mixed bag was noted, with some industries such as mining and quarrying seeing rapid expansion between 2009 and 2012, at 43.7% CAGR, before crashing to -34.3% CAGR between 2013-2016. Construction has seen a significant drop too, as has transportation during the same period. Financial services and utilities are the only industries to have seen gains during the period. Relatively high levels of inflation across both periods put a further dampener on real growth rates.Spenging in consumer segmentsThe study also considered the different segments of the market that have enjoyed the highest level of growth during the crisis years, from 2013 until 2015, relative to the years before the crisis from 2010 to 2013. Interestingly, while spending in various segments was relatively consistent, gas stations, super markets and pharmacies all enjoyed relatively high and resilient levels of growth. Other areas of the economy saw slowdowns.

Consumers were particularly less keen on durable goods such as consumer electronics, apparel, department stores and furniture and home décor. Within the latter category in particular, spending growth fell from more than 12% CAGR to around 3%. While the economy saw contraction, the report notes that, for a large part, growth in consumer goods spending remained relatively robust during the crisis years.Global PE interest in Brazil

Private equity market potential

According to BCG, the Brazilian PE market has growth potential. The firm notes that as a % of GDP, PE activity represents around 0.31%, substantially below activity in the US of 1.41% and the UK of 1.91%. Competition remains relatively fierce, however, as a range of global players enter the market, attracted by relative maturity and lower levels of penetration.

Median deal sizes in the country also tend to be relatively lower than that of developed markets, with key players investing only comparatively low amounts per deal in the country; in total, around 63% being in the $50 million to $200 million range, compared to 47% for the US in the same period. The large number of deals in the low range, therefore, reflects tighter competition for deals.Investment activity and exists.The research also looked at PE and VC activity in Brazil over the six years, in terms of investments, dry power and other (reinvestments in companies, operating expenses and returns to shareholders).

Total investment, saw an increase even during the down period, hitting $53.9 billion in 2014, before falling slightly to $45.9 billion in 2015 and $41 billion last year. The largest segment by far was investment, followed by dry power.

Value creation has increasingly been derived from revenue growth and margin improvement, at 50% and 33% respectively in 2014, as compared to 2011 when they stood at 45% and 25% of growth respectively. Relatively low gains from leverage were reflected in the relatively high interest rate in the country.

Finally, exit activity has remained relatively steady, even while investment flows have declined considerably – falling by 39% between 2015 and 2016. Exits were predominantly from strategic buyers (45%), followed by IPO (19%).

Commenting on the result, the firm’s Heitor Carrera, a BCG partner and co-author of the report, said, “That combination of factors puts Brazil in the sweet spot for companies willing to invest in emerging economies. Over the next decade, the country will offer a rare opportunity to both global firms that want to add emerging markets to their portfolios and local firms in Brazil that want to step up their investments there.”


Project management industry adds £156 billion of value to UK economy

15 April 2019

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.


Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”