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Private equity and venture capital in an emerging economy: evidence from Brazil

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  • Leonardo de Lima Ribeiro
  • Antonio Gledson de Carvalho

Abstract

The Private Equity and Venture Capital (PE/VC) financial model was initially developed in the US and, therefore, designed for the US institutional environment. The degree to which the US PE/VC model can perform in other institutional environments is an interesting question. This article is based on data supplied by all of the 65 PE/VC organizations with offices in Brazil in 2004. Comparing Brazil and the US, we found that the main similarities are: an industry composed mostly of independent organizations, managing capital coming mostly from institutional investors; capital is heavily concentrated regionally and in few organizations; investments are made within a close geographical distance; and software and IT are preferred sectors. The main differences are that for Brazil: investments are concentrated in more advanced stages of corporate development; since credit is scarce, few LBOs take place; low levels of sector specialization (PE/VC investing in a broad variety of industrial sectors); firm concentration in Sao Paulo's financial district suggests a quest for commercial partners and strategic buyers for portfolio companies; and Brazilian PE/VC regulation recognizes the inefficiency of the legal system and forces the use of arbitration. We also discuss possible reasons for these adaptations.

Suggested Citation

  • Leonardo de Lima Ribeiro & Antonio Gledson de Carvalho, 2007. "Private equity and venture capital in an emerging economy: evidence from Brazil," Venture Capital, Taylor & Francis Journals, vol. 10(2), pages 111-126, December.
    • Handle: RePEc:taf:veecee:v:10:y:2007:i:2:p:111-126
    DOI: 10.1080/13691060801946121
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    References listed on IDEAS

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    1. World Bank, 2005. "World Development Indicators 2005," World Bank Publications - Books, The World Bank Group, number 12425.
    2. Cumming, Douglas & Schmidt, Daniel & Walz, Uwe, 2004. "Legality and venture governance around the world," CFS Working Paper Series 2004/17, Center for Financial Studies (CFS).
    3. World Bank, 2005. "World Development Indicators 2005," World Bank Publications - Books, The World Bank Group, number 12426.
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