Brazilian MID-MARKET - São Paulo Frankfurt Connection, A new venture in Brazil

December 31, 2009

Source: Private Equity Online (http://www.privateequityonline.com/Article.aspx?aID=0&article=49649)

Hans Apostel moved to São Paulo from his homeland, Germany, in 1978 to work at the German consultancy Roland Berger. São Paulo had already developed a significant group of important corporate divisions of German companies, and it was Apostel’s job to sell strategic consulting services to these firms.

With the turbulent late 1980s and early 1990s approaching, many of these clients were eager to divest their Brazilian operations. Apostel, along with other expatriate Germans, acquired some of these businesses, later selling them during the first major wave of buyouts in the country in the mid-1990s.

Now, Apostel has decided to seek new investment opportunities as the timing appears suitable for initiating a new acquisition cycle in Brazil. He and a select group of seasoned business veterans have launched OSF Merchant Banking in São Paulo. The company has not officially announced other partners besides Apostel, but market documents indicate the involvement of "a former senior partner from Permira... and the (former) CEO of BASF’s Brazilian group."

The firm is set to start fundraising in 2010, although the first phase of deals is expected to be funded by partners and institutional investors. The company will focus on "hidden champions" within the Brazilian mid-market, which, in turn, will benefit from OSF Merchant Banking’s expertise in connecting with international counterparts for partnerships, according to the document. OSF Merchant Banking may provide equity and financing for specific debt transactions related to its target companies.

In a statement, Apostel commented on the new Brazilian opportunity:"We are currently entering a third cycle, with well-capitalized private equity firms arriving in Brazil regularly and seeking substantial deals... Brazilian funds will play a lesser role moving forward, especially in light of a process where Brazilian pension funds—until now the country’s sole providers of long-term capital—are redefining their roles and approach toward alternative asset control.