Crescera Capital has been investing as an asset manager in the Brazilian market since 2008. Please talk about the opportunity you saw at that time and why Crescera was launched. How has Crescera’s investment strategy changed over time?
Crescera Capital launched in 2008, our first fund was focused entirely on the education sector in Brazil, followed by another fund focused on consumer goods and services. Over time, we raised another two funds dedicated to these strategies. Initially, we kept the strategies separate; they were managed by different investment teams and had different timelines. For our fifth private equity fund, we decided to consolidate our investment mandate into one larger vehicle targeting investments in sectors with strong growth potential, such as technology, healthcare, retail, education and consumer goods and services.
Our investment strategy has largely remained unchanged. We see very attractive investment opportunities in the middle-market segment in Brazil, especially around the consolidation of highly fragmented industries. We prioritize companies with resilient business models, strong management teams and the potential to create long-term value.
Another important milestone we had at Crescera was expanding across other asset classes. Around 2012, we saw an opportunity to invest in smaller technology companies that were disrupting the education and consumer sectors we were already covering, so we decided to launch an early-stage VC strategy. We now have a dedicated team and a series of funds covering VC. We are currently investing through our third VC fund and were recently selected by BNDES to manage the Criatec 4 ESG Fund.
Some of Crescera’s important investors are Development Finance Institutions such as the IFC, which has supported you through multiple funds. How have DFIs shaped Crescera’s investment strategy and ESG practices? What role do you see DFIs playing in private capital in Brazil today?
Initially, our first three funds were structured locally, as they were primarily funded by Brazilian institutional investors and family offices. As more international investors started looking into Brazil, our fourth and fifth private equity funds attracted commitments from a mix of both local and international investors, including several international DFIs. They have played a crucial role in shaping Crescera’s ESG practices. Their support has enabled us to align our investment approach with sustainable development goals and best practices in environmental, social and governance (ESG) criteria. DFIs not only provide financial backing but also expertise and guidance in integrating ESG considerations into our investment process. DFIs continue to be important partners for Brazilian managers today.
Last year, Crescera Capital acquired a 27% stake in Grupo Salus, a Brazil-based company in the healthcare and wellness sector. What was attractive about this investment?
Grupo Salus was created by Dr. Carla Sarni using a franchise business model. Its initial focus was odontology retail, but the company expanded across other sectors such as ophthalmology, immunization, wellness and laser hair removal. Within the odontology segment, the company has verticalized some of its business, opting for producing some medical supplies and equipment in-house or through partnerships with manufacturers. We saw an attractive opportunity to help the company grow through more brands, improve its governance at the franchisor level as well as expand penetration and sales of current franchises.
We had already invested in healthcare companies in Brazil, but most healthcare models rely heavily on insurance companies as the main payors for services, resulting in a B2B model. We found the B2C model of Grupo Salus attractive, as it allowed us to access the retail component of the healthcare sector, providing us with a way to amplify our exposure to healthcare, but diversifying it with exposure to a different subsegment. Grupo Salus is the second healthcare investment made through our fifth growth fund, but we also have closed deals in retail, services and education.
How has the market for exiting portfolio companies in Brazil evolved and what exit strategies has Crescera executed? What are some of the lessons learned in exiting portfolio companies in Brazil from your experience?
Crescera’s approach to exiting portfolio companies is flexible, considering various alternatives such as IPOs, strategic sales, founder buybacks and secondary sales to financial sponsors. We have listed companies on the Brazilian exchange and exited to both domestic and international acquirers, depending on the specific circumstances and valuation considerations. The window for exits in Brazil can be very hard to predict, so we work alongside our companies to improve governance and prepare for an eventual listing or sale. We also tend to pursue a dual process and consider different exit alternatives at the same time. Lessons learned from exited portfolio companies in Brazil include the importance of timing, preparation and alignment of interests among stakeholders. Despite challenges, we remain agile and proactive in pursuing value-maximizing exit opportunities for our investors.