The total market capitalization of publicly listed companies in Brazil is currently three quarters of a trillion US dollars 1, ranking 15th in size globally. Private companies in the country have a combined value that well exceeds that public company number. That brings the total valuation of public and private companies to almost two trillion dollars. The highlighted research seeks to explore key issues around drivers of the Brazilian economy and focuses in on the impact and trends for private companies.
The key findings center around two primary facts. First, private companies are a key part of the economic story in Brazil. The report finds that the impact of private companies on the economy grew significantly both on an absolute basis and compared to public companies over the past two years. Additionally, not only did the impact of private companies grow but on an aggregate basis it now exceeds public companies.
Second, consumers and consumer driven sectors appear to be key drivers of current and future economic activity in the country. These sectors have both large and growing valuation multiples and will likely present many opportunities for investment and growth in the Brazilian economy. Looking at sectors overall, this report finds:
- Highest equity value to revenue transaction multiples are in Energy (3.0), Utilities (2.7), Consumer Discretionary (2.1) and Healthcare (1.9) sectors.
- Two year transaction multiple trends for Energy actually declined (-32%), while Utilities (+467%), Consumer Discretionary (+116%), and Healthcare (+80%) all increased significantly, along with Industrials (+97%).
- Largest Control premiums were in Consumer Discretionary (216%), Energy (170%), Industrials (120%), Utilities (81%) and Healthcare (9%).
Adding these three key drivers up shows Utilities, Consumer Discretionary and Healthcare winning in all categories. Because the report finds a few related transactions skewing the Utilities numbers, our research identifies Consumer Discretionary and Healthcare as poised for opportunity (with Industrials as a strong contender as well!).
1USD equivalent at May 4, 2015 Brazilian Real to USD exchange rate. All currency is reflected in US dollars unless otherwise stated.
2All historical data in this report is pulled as of 5/15/2015 unless otherwise stated.
3S&P Capital IQ is the source of all the historical FX data throughout the document. Since all numbers use historical FX for conversion between Brazilian Real and USD, 2015 numbers will be affected by the over 1/3 drop in number of dollars 1 Real could purchase on May 4, 2013 versus May 4, 2015. This means that any positive comparisons between 2013 and 2015, such as the transaction based multiples are even more impressive than it would appear on the surface.