Dear Friends,
Autumn has begun, but temperatures are still hot in southeastern Brazil, where I recently spent a week meeting healthcare companies and investors with my colleagues from our Brazilian affiliate.
Brazil has seen spectacular growth in recent years, which has lifted millions of Brazilians out of poverty. In 2011 alone, 2.7 million Brazilians joined the ‘C’ class (Brazil classifies its economic classes from ‘A’s at the upper end of the scale, to ‘E’, at the bottom).
This presents an opportunity for companies throughout the healthcare sector, as more people can afford to get preventative care and medical procedures that would have previously been out of reach.
Anecdotally, I heard that business has been particularly good for companies that cater to aesthetic treatments (including both medical and dental), since people are often willing to spend money for cosmetic treatments even before other, more health-oriented, procedures.
With respect to the capital markets, there are few publicly-listed healthcare firms in Brazil. It isn’t entirely clear why this is so, but it is likely a legacy of historically poor corporate governance and tax compliance issues, though Brazil is improving rapidly in these areas.
For now, however, Brazilian IPO candidates often have over US $50 million of EBITDA. This means most companies are still privately owned. Because of the complexities with local regulations, taxes, and the dynamics of family-owned companies, foreign buyers are often well advised to work with reputable local advisors when making an investment in Brazil.