BACK TO THE ROOTS: OSF STARTS A NEW PRIVATE EQUITY VENTURE IN BRAZIL WITH SEASONED VETERANS.

source: http://apostel.com.br/newdevelopments.html

Veteran financier Hans J.Apostel, who pioneered the concept of the management buyout in Brazil in the early 90s, has recently teamed up with an impressive group of seasoned colleagues, all who share professional and personal Brazilian roots as well as two decades of international experience in private equity in Europe and Brazil. They believe that significant opportunities will be found in this BRIC country in years to come.

"We have seen the first wave of institutional PE firms entering the market in the mid 90s. This provided excellent exit options for our portfolio which was comprised of former subsidiaries of international corporations, which were eager to reduce their exposure to hyper-inflation and erratic economic policies in the late 80s and early 90s in Brazil", says Mr. Apostel. Although the stabilization plan of the mid 90s changed the fundamentals of the Brazilian economic environment forever, a sequence of international crises in emerging economies and business sectors and an adjustment to a non-managed Brazilian exchange policy in addition to limitations of the capital markets in the years to follow, adversely affected the performance of these first cycle PEs. A second cycle helped realize very attractive IRRs to those funds, mainly Brazil-based, who invested prudently in the early "surprise" years of the Lula presidency and the commodity bull market and exited opportunistically through an unprecedented wave of IPOs.

"We are entering a third cycle now, with well capitalized global PE firms parachuting into Brazil left and right looking for transactions of substantial deal-size", says Mr Apostel. "Brazilian funds will play a lesser role going forward, particularly in light of a process in which Brazilian pension funds, thus far sole provider of long term capital in the country, are re-defining their role and attitude towards governance regarding alternative assets."

Given this scenario, the new venture "OSF Merchant Banking" will focus on control investments in Brazilian "hidden champions", mid-cap companies with a market leadership in often overlooked niche markets. This investment concept has rendered outstanding returns for the founding partners in Europe.

These companies, all of them with impressive growth potential, will benefit from the team's knowledge of their international counterparts and the team's long track record of exits. This is still an exception in Brazil despite an increasingly professionalized market. Another innovative aspect is that OSF Merchant Banking will be able to provide equity and certain debt financing, giving OSF Merchant Banking more independence and flexibility when structuring acquisitions.

OSF Merchant Banking founding partners include among others, Dr.Thomas Jetter, former senior partner of the leading European Private Equity Fund Permira, who previously hold senior positions at J.P.Morgan and Mckinsey in Sao Paulo and Dr Volker Trautz, the former Chairman and CEO of the $40 billion petrochemicals operation Lyondell/Basel. He is refocusing on Brazil as an operating partner, where he has lived almost 20 years serving as the CEO of the BASF Brasileira.

Although the official fund road show is scheduled to start not before end of January 2010, OSF Merchant Banking is already in negotiations regarding possible acquisitions which would be financed by the partners and related private and institutional investors prior to the closing of the fund.