Italian companies in Brazil: “In-House” Financial Consultant

Nov 1, 2016

GM Venture is a consulting and management company founded in 2006 and based in São Paulo. We manage investments of Italian companies in Brazil with a particular focus on day-by-day activities (start-up, branch management) and extraordinary activities (M&A, market penetration). Read the article to find out all the services we offer in Brazil below.

If you want to know how to start a business in Brazil, click here!

Zooming on the case of GM Venture.

From San Paolo, the company founded by Graziano Messana replaces the CFO in the branches of Italian companies in Brazil.

If consulting has become an increasingly competitive industry, where to find its own positioning, it is necessary to have an in-depth knowledge of the business and the clients’ business, and for many professionals to enter and understand the company has become “the business”.

We are talking about companies offering outsourcing services such as “Your CFO” but also about teams of professionals that have “in-house” roles in certain contexts, for example in case of M&A or, in particular, entry into a new market.

«Opening a branch or do M&A in a foreign country is a positive sign of company’s growth, but it might also be a move full of threats unless carefully handled – observes Graziano Messana, founding partner of the interim management and consulting company GM Venture, headquartered in Sao Paulo, Brazil – in particular in complex markets such as the South-American one».

PERMANENT CONSULTANCY

 With a team of 10 people, a few steps from Avenida Paulista, in the heart of Brazil’s financial capital, GM Venture was founded by Messana in 2006. The company speaks to those who intend to enter the Brazilian market both through M&A or by opening new branches or subsidiaries, as well as through start-ups and needing someone who knows the country and knows how to deal with the business and cope with the complexities of the local market.

The group builds its own business model on two pillars: a presence in the reference market, in this case, the Brazilian one – that “with its 204 million inhabitants and a GDP of $1,774 billion is a country rich of opportunities” says Messana – and the valorisation of a figure that is not always considered as it should in a company, the Chief Financial Officer.

«Initially, the idea was to manage the opening of a branch or an acquisition in Brazil on behalf of the parent company – the manager says- and start-up the local company by taking care of the structure and of all the financial and fiscal aspects, reporting to entrepreneurs/shareholders, and then deliver the whole package to the client once the business has been stabilized».

After two or three years of management, however, “we realized that it was often difficult for companies to find a substitute, especially on ht lines of Italian managers, capable of managing the complexities of the Brazilian market in an equally effective way,” because, he contends, “it takes a lot of time to know and understand well Brazil’s financial, fiscal and legislative landscape, time that companies usually do not have abroad».

The group has therefore started offering a “permanent” service either as «consultant or as CFO and direct branch general manager».

But who gets into the company? «In many cases, it would be me,» explains Messana, «in others, we have our team of well trained Italian and Brazilian managers». After 10 years of activity, the company today manages, through approximately 40 managers, more than 20 client companies, including Fiera Milano, Eataly, Brunello Cucinelli, Moleskine and Azimut.

A MARKET NOT FOR EVERYONE

 «All clients – notes Messana (investment banking background in Luxembourg and advisor in Italy with the company Electa) – got to know or were introduced to us thanks to our network, namely law firms, financial institutions and businesses. We do not do any marketing ourselves but carry on by leveraging the reputation we have built. And we are not even trying to convince or force a company to enter the Brazilian market. In fact, 4 out of 5 times, we actually reject a mandate because we believe the company does not have the right characteristics to enter the Brazilian market».

To establish that «we carry out a feasibility study where we look at competitors in the Brazilian market, and try to understand the appeal of the product and whether it can be sold in Brazil, analyze the business model of the company, analyze the reference market and the industry and cross-check the impact of taxes, cost of money and other difficulties of the market».

Among these, there are, for example, «the cost of money among the highest in the world, a heavy tax system – to pay taxes in Brazil 2,600 hours a year are needed, vs. a world average of 261 hours (Italy counts 269) – annual inflation of 7,20% e costs and import duties that may weigh up to 100% of the initial value of the product». Not to mention “that Brazil is among the countries with most labour claims in the world: in 2016 only, there were around 3 million processes».

OPPORTUNITIES IN BRAZIL, LEVERAGING DIMENSION AND CONSUMPTION

 

Despite some uncertainties in the globally, emerging markets, driven by the political financial crisis in the EU and the US, have experienced a solid quarter, according to the Templeton Emerging Markets Group quarterly report.

In particular, the focus of many international observers is Brazil, back in the financial spotlight after the political change occurred with the impeachment of the former president Dilma Rousseff and the appointment of Michel Temer which is expected to remain in office until the end of 2018. «The Brazilian economy is cyclical – explains Messana – has recovered rapidly since the financial crisis of 2009, with an economic boom due to the growth of the domestic market and the high price of commodities. The global economic recession and the political crisis have accentuated weaknesses, but now, after two difficult years, the country sees interesting growth prospects already starting from 2017, when GDP is expected to grow by 0.5%, compared with a 3.2% decline in 2016».

The power of the main South American country comes in part from its size: «With the US, China, Russia and India, Brazil is one of the few in the world with more than 100 million inhabitants, an area of ​​over 3 million km2, a GDP of over $1 trillion». It is also the gateway to other Mercosul’s markets.

TECHNICAL SOLUTIONS

In this context, what Messana and his team do is to offer technical solutions that can counterbalance the complexity of the Brazilian market: «For example – he explains – we are developing tools to optimize financial transactions, from structured loans to exchange rate hedging, which is very volatile. We do accurate cash management with weekly reporting to our parent company, we handle consultants and deal with shareholders, we are concerned with protecting the company’s intellectual property and optimizing import costs».

Moreover «we are also legal representatives of companies in Brazil, a role that requires, for example, to be resident in the country, and we also manage the post-closing phase in M&A transactions». The objective, he adds, «is to manage everything that can generate results at the branch level and to safeguard the value that can be lost if we do not understand and do not know the dynamics of the underlying market».

According to Messana, this work can only be done by a finance director: «Country managers and business managers, figures often responsible for the financial management of foreign affiliates, should focus on the business and think about revenues. Finance management must be in the hands of a CFO who knows how to optimize the fiscal structure of the company and knows the Brazilian financial system in detail, otherwise, even a high EBITDA won’t secure cash generated».

The CFO role is for Messana «a key figure that companies often fail to find or, at worse, underestimate. And here we are, offering skills and taking over all the financial management of the company overseas».

And what about costs? «We charge a flat management fee and no time consuming: the company does not pay based on the time of consultancy but has a precise and defined fee that is normally renegotiated every year. In this way, the parent company knows how much it will cost them the financial management of the branch and can thus include these costs into their budgets».

The managers, on the other hand, are all effective employees of the company, according to a «alignment of interests and driving the creation of synergies through a “management by objectives” approach».

Learn more about why to invest in Brazil, here.

Original article in Italian.

Check Out These Related Posts

Invest in Brazil “Che te fa Bene”

Invest in Brazil “Che te fa Bene”

Chi a buon albero s'appoggia, buon ombra lo ricopre. The old Italian saying (Who leans on a good tree, a good shadow covers it) could explain the reasons that have inspired Italian entrepreneurs to invest in Brazil, in spite of the crisis. The release of more than 400...

read more
The comment/ Brazil: a possible anti-virus against the pandemic?

The comment/ Brazil: a possible anti-virus against the pandemic?

It is unfortunate to see such a critical situation affecting Italy. The effects that are pouring on the Italian economy will provoke in the coming years an uncertain scenario and a greater sensitivity on the issues of internationalization, a fundamental and vital...

read more
Open chat