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Brazil: Carrot and stick driving PE growth

3i focuses on middle market; More companies seek partners

Private equity firm 3i is the latest global player to open a fund based in Brazil – the most popular country for new private equity funds. Research by the Emerging Markets Private Equity Association (EMPEA) and Coller Capital found that Brazil had replaced China as the most attractive emerging market jurisdiction for private equity funds’ limited partners.

3i announced its first acquisition at the end of last year, taking a “significant minority stake” in TV cable and bandwidth services provider Blue Interactive for R$100 million ($55 million). It is 3i’s first transaction following a search process that has covered more than 240 companies since April 2010.

Marcelo Di Lorenzo, partner and head of Brazil for 3i, declines to reveal the size of capital the global firm has ready to deploy in Brazil but he envisages completing an average of three deals a year with the aim of building a portfolio of about 10 Brazilian companies.

Some private equity funds have found recent valuations of Brazilian companies prohibitive. For example, BR Partners told Euromoney in December that it was yet to invest any of the $200 million private equity fund it had raised because of higher valuations of targets.

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