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private equity market in brazil compensation survey - GVcepe

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PRIVATE EQUITY MARKET IN BRAZIL<br />

COMPENSATION SURVEY<br />

JANUARY 2012


Private Equity <strong>in</strong> Brazil<br />

hir<strong>in</strong>g trends<br />

Despite the great growth over the last five<br />

years, 2011 was probably one of the most<br />

important years for the <strong>private</strong> <strong>equity</strong><br />

<strong>in</strong>dustry <strong>in</strong> Brazil. A record amount of<br />

funds raised by the <strong>in</strong>dustry and the arrival<br />

of several new players were the highlights<br />

of 2011.<br />

The comb<strong>in</strong>ation of the country's favorable<br />

economic condition, the growth<br />

perspectives for companies and the<br />

possibility of consolidation <strong>in</strong> various<br />

sectors and geographies, forms a very solid<br />

tripod for PE development. Despite all the<br />

<strong>in</strong>stability <strong>in</strong> the global economy, there is a<br />

sentiment that the Brazilian real economy<br />

is seen as a land of great opportunities. But<br />

this perception is accompanied by a very<br />

similar level of challenge.<br />

Brazilian real<br />

economy is seen as<br />

a land of great<br />

opportunities<br />

One of the ma<strong>in</strong> challenges for PE firms is<br />

related to the lack of corporate<br />

governance <strong>in</strong> family-owned companies<br />

and a lack of human capital. It has never<br />

been harder to recruit an experienced PE<br />

professional or professional management<br />

for portfolio companies; especially CFOs<br />

and CEOs.<br />

Scope and Methodology<br />

Our objective <strong>in</strong> conduct<strong>in</strong>g this <strong>survey</strong><br />

was to provide guidance to our clients on<br />

<strong>compensation</strong> for the <strong>private</strong> <strong>equity</strong><br />

<strong>market</strong> <strong>in</strong> Brazil.<br />

We have collected data directly from<br />

employers and professionals from the<br />

<strong>private</strong> <strong>equity</strong> <strong>in</strong>dustry.<br />

Twelve of the ma<strong>in</strong> <strong>private</strong> <strong>equity</strong> firms<br />

currently operat<strong>in</strong>g <strong>in</strong> Brazil are<br />

represented <strong>in</strong> this sample. Every care has<br />

been taken <strong>in</strong> compil<strong>in</strong>g data. Nevertheless,<br />

the <strong>survey</strong> is <strong>in</strong>terpretive and <strong>in</strong>dicative;<br />

not conclusive. Therefore, <strong>in</strong>formation<br />

should be used as a guidel<strong>in</strong>e only and we<br />

do not make any representation or<br />

warranty <strong>in</strong> respect of such <strong>in</strong>formation.<br />

Twelve of the ma<strong>in</strong><br />

<strong>private</strong> <strong>equity</strong> firms<br />

currently operat<strong>in</strong>g <strong>in</strong><br />

Brazil are represented<br />

<strong>in</strong> this sample.


PRIVATE EQUITY MARKET IN BRAZIL | COMPENSATION SURVEY<br />

JANUARY 2012<br />

Compensation and hir<strong>in</strong>g trends<br />

Private Equity Professionals<br />

Growth <strong>in</strong> the PE <strong>in</strong>dustry s<strong>in</strong>ce 2005 has<br />

been greater than its own capacity to tra<strong>in</strong><br />

and develop professionals with the entire<br />

PE cycle experience. That's the ma<strong>in</strong> reason<br />

why it is so hard to recruit PE<br />

professionals; especially directors and<br />

manag<strong>in</strong>g directors.<br />

Hir<strong>in</strong>g a Director or Manag<strong>in</strong>g Director<br />

with solid experience <strong>in</strong> PE management is<br />

almost impossible. The universe of<br />

professionals with solid experience <strong>in</strong> the<br />

entire PE cycle is limited to 20 or 30<br />

people. In addition to that, the lack of a<br />

local track record for most players makes<br />

it harder for professionals to estimate how<br />

much greater their 'carried <strong>in</strong>terest'<br />

participation will be when chang<strong>in</strong>g jobs.<br />

For junior roles up to a VP level, PE firms<br />

have also been sourc<strong>in</strong>g candidates from<br />

other <strong>in</strong>dustries.<br />

However, they search for exceptions and<br />

not for the average profile of those<br />

alternative sources:<br />

Investment Bank<strong>in</strong>g: easy to f<strong>in</strong>d professionals<br />

with appropriate technical background but hard<br />

to f<strong>in</strong>d the appropriate soft skills. Long term<br />

th<strong>in</strong>k<strong>in</strong>g, lack of “deal-clos<strong>in</strong>g orientation”, depth<br />

of th<strong>in</strong>k<strong>in</strong>g and short term <strong>compensation</strong> are the<br />

ma<strong>in</strong> aspects to be evaluated.<br />

Strategic Consult<strong>in</strong>g: professionals have great<br />

strategic th<strong>in</strong>k<strong>in</strong>g but not all of them possess<br />

solid model<strong>in</strong>g and f<strong>in</strong>ancial skills. On the softskill<br />

side, it is important to f<strong>in</strong>d professionals<br />

with an entrepreneurial profile and not the<br />

“PowerPo<strong>in</strong>t presentation-mak<strong>in</strong>g” k<strong>in</strong>d of<br />

professional.<br />

Professionals from corporate organizations <strong>in</strong><br />

general: an <strong>in</strong>terest<strong>in</strong>g option when PE firms are<br />

look<strong>in</strong>g for sector specialists. Typical background<br />

will be <strong>in</strong> f<strong>in</strong>ancial plann<strong>in</strong>g, new bus<strong>in</strong>ess<br />

development, strategy and M&A. International<br />

MBA from a top-10 university is almost a<br />

prerequisite.<br />

Average Ranges for Monthly Salary and Bonus (BRL)<br />

Title Monthly Salary* Bonus Total Comp<br />

average m<strong>in</strong>. average max. average m<strong>in</strong>. average max. average m<strong>in</strong>. average max.<br />

Analyst 7,000 12,000 80,000 150,000 171,000 306,000<br />

Associate 11,000 18,000 150,000 250,000 293,000 484,000<br />

VP 22,000 28,000 240,000 400,000 526,000 764,000<br />

Director 28,000 35,000 420,000 525,000 784,000 980,000<br />

MD 45,000 60,000 600,000 800,000 1,185,000 1,580,000<br />

CFOs for Portfolio Companies<br />

Regardless of the size of the deal or its<br />

structure, replac<strong>in</strong>g the CFO once the<br />

<strong>in</strong>vestment is made is almost the rule. In<br />

this situation, hir<strong>in</strong>g a CFO is a critical and<br />

challeng<strong>in</strong>g mission.<br />

PE <strong>in</strong>vestments are typically made <strong>in</strong> familyowned<br />

companies with no professional<br />

management. Thus, hir<strong>in</strong>g a CFO is key to<br />

address all the issues identified dur<strong>in</strong>g the<br />

due diligence process and to create a<br />

framework of processes, controls, and<br />

systems which will be fundamental to<br />

* Annual salary equals monthly salary x13<br />

support high growth after the <strong>in</strong>vestment,<br />

and generate returns. In most cases the<br />

CFO will also have great <strong>in</strong>volvement with<br />

capital <strong>market</strong>s and M&A transactions.<br />

This requires a CFO with a complex and<br />

rare set of skills. The ideal CFO profile will<br />

be closely related to the profile of the<br />

company and to the bus<strong>in</strong>ess plan of the<br />

<strong>in</strong>vestment. The differences <strong>in</strong> profile will<br />

also impact the level of <strong>compensation</strong>.<br />

Therefore, we are present<strong>in</strong>g 3 of the most<br />

common scenarios we've encountered.


PRIVATE EQUITY MARKET IN BRAZIL | COMPENSATION SURVEY<br />

JANUARY 2012<br />

Scenario 1<br />

CFO to improve level of corporate governance<br />

Candidate Profile<br />

Solid experience <strong>in</strong> account<strong>in</strong>g, controll<strong>in</strong>g,<br />

taxes and f<strong>in</strong>ancial plann<strong>in</strong>g. No previous<br />

experience with capital <strong>market</strong>s operations<br />

or with M&A transactions.<br />

Company profile<br />

Total revenue rang<strong>in</strong>g from R$100M to<br />

R$300M, no IPO perspectives <strong>in</strong> the short<br />

term and expectations to grow organically.<br />

Average Monthly Salary Average Bonus Stock Options<br />

between R$30 and R$35K 4 to 8 monthly salaries up to 0.5% of total <strong>equity</strong><br />

Scenario 2<br />

CFO to improve level of corporate governance,<br />

lead M&A and treasury transactions<br />

Candidate Profile<br />

General experience <strong>in</strong> account<strong>in</strong>g,<br />

controll<strong>in</strong>g, taxes and tax plann<strong>in</strong>g. Previous<br />

experience with capital <strong>market</strong>s operations<br />

and M&A transactions. No IPO<br />

experience.<br />

Company profile<br />

Total revenue from R$200M to R$500M,<br />

heavy M&A and fundrais<strong>in</strong>g activity and<br />

IPO expected from 2 to 4 years.<br />

Average Monthly Salary Average Bonus Stock Options<br />

between R$40 and R$50K 6 to 10 monthly salaries up to 0.75% of total <strong>equity</strong><br />

Scenario 3<br />

CFO with previous IPO experience<br />

Candidate Profile<br />

Professionals with a complete technical<br />

background, respected track record and<br />

previous experience with IPOs.<br />

Company profile<br />

Total revenue rang<strong>in</strong>g from R$300M to<br />

R$800M, aggressive growth perspectives<br />

and IPO expected <strong>in</strong> 1 to 2 years.<br />

Average Monthly Salary Average Bonus Stock Options<br />

between R$50 and R$70K 8 to 12 monthly salaries up to 1% of total <strong>equity</strong><br />

Disclaimers<br />

Confidentiality<br />

Flow Human Capital fully recognizes the sensitivity of participant data and holds <strong>in</strong>dividual company and employee data <strong>in</strong> the strictest<br />

confidence. Survey data is only published <strong>in</strong> aggregate form and is never displayed or released <strong>in</strong> such a way that a specific professional or<br />

firm's pay levels could be determ<strong>in</strong>ed.<br />

Responsibility<br />

Flow Human Capital will not be liable for damages of any k<strong>in</strong>d aris<strong>in</strong>g out of or relat<strong>in</strong>g to the use of or <strong>in</strong>ability to use this <strong>in</strong>formation.<br />

These Indices are not <strong>in</strong>tended as a basis for f<strong>in</strong>ancial decisions. No responsibility whatsoever is assumed for their accuracy or suitability<br />

for any given purpose.


FLOW HUMAN CAPITAL is an<br />

executive search firm with a<br />

ma<strong>in</strong> focus on F<strong>in</strong>ance, F<strong>in</strong>ancial<br />

Market and Top Management.<br />

The company consists of<br />

executive search consultants<br />

who have successfully hired<br />

over 750 executives for its<br />

customers and whose<br />

comb<strong>in</strong>ed experience makes<br />

up over 30 years of professional<br />

activity <strong>in</strong> Executive Search.<br />

Directors:<br />

Bernardo Cavour<br />

cavour@flowhc.com<br />

Igor Schultz<br />

igor@flowhc.com<br />

Joseph Teperman<br />

jteperman@flowhc.com<br />

Luiz Gustavo Mariano<br />

mariano@flowhc.com<br />

Rafael Gregori<br />

gregori@flowhc.com<br />

Rua Iguatemi, 192 14º andar Itaim São Paulo - SP, Brazil<br />

(55-11) 3707-0000 | www.flowhc.com

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