High interest rates hold back the resumption of private equity and venture capital after the election
Managers have difficulty selling stakes and returning capital, and the improvement must be slow and selective, according to executives interviewed by Bloomberg Línea.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM BLOOMBERG LÍNEA · 2 MIN
Lula's re-election on Sunday (25) removed part of the uncertainty that weighed on venture capital and private equity managers, but the sector still does not feel enough relief to pivot again. According to Bloomberg Línea, the improvement should come gradually and selectively.
The bottleneck is at the exit. Managers face difficulty in selling stakes and returning capital to investors, and without this return, raising new funds is hampered. In a market that depends on entry and exit cycles, the gears stop right where they should turn.
The report highlights three conditions for the recovery: interest rates, fiscal policy and exchange rate. Among them, the cost of money is what weighs most for those who need to finance the purchase of companies, because expensive credit reduces what a buyer can pay.
Rodolfo Marzochi Campitelli, known as Rods and managing director Brazil at Pipeline Capital, assesses that the election does not resolve the cost of capital, the main barrier to unlocking mergers and acquisitions operations. Pipeline Capital is an independent M&A consultancy focused on mid-market.
In our view, in line with the defense of fiscal responsibility, the predictability of public accounts is the most direct way to reduce the cost of capital. Without this signal, the discussion about the sector tends to get stuck in the dispute over interest and exchange rates, and the recovery continues to depend on factors that go beyond the ballot box.
What changes for the investor
For those who invest in the stock market, in Nasdaq, in interest or in dollars, the election ended a doubt, but it did not end the high cost of money that holds back the sector. Companies that depend on selling stakes or raising funds may remain under pressure as long as this cost remains high, and the recovery tends to be uneven, favoring specific cases rather than a broad movement. The report does not provide price projections, and this article also does not indicate direction for assets. What is worth monitoring are interest rates, fiscal policy and exchange rates, variables that should show when the outflow cycle starts again.
Automatically translated from Portuguese.
