Welcome! This newsletter is dedicated to acquiring and operating Micro SaaS firms. Join us every other Saturday morning for deal analysis, operating frameworks / templates, and other musings...
I'm currently working on sell-side mandate in Brazilian ERP (around $2.5M ARR) for micro/SMB retail space
My few thoughts:
1. LatAm is obviously a pure emerging market risks&returns play. "Risks" pf Political&Regulatory&Currency&Macro issues very often give you "return" of double-digit market growth, digitally untapped verticals, lower multiples etc.
2. Currency risk in Brazil isn't such a drama, especially compared to other EMs. There was a 40% depreciation in the beginning of COVID, otherwise last 4 years has been pretty stable at even more appreciation periods. Not a guarantee of course if other macro could come into play to adverse things, but still pretty much favourable compared to other EM peers.
3. TAM - agree on market opps. Brazil is a highly entrepreneurial country with around 1M net new micro/SMBs setup each year, depending on the economy cycle.
4. Valuations - while multiples are of course being exposed to country risk, strong assets aren't being too discounted to developed countries comparables (meaning Western Europe in this ex.). I'm currently talking LOI at 7-9x EBITDA with several European and local buyers. Again, I mean strong quality assets, like double digit ARR grow, 30%+ EBITDA margin etc.
Thanks for the read.
I'm currently working on sell-side mandate in Brazilian ERP (around $2.5M ARR) for micro/SMB retail space
My few thoughts:
1. LatAm is obviously a pure emerging market risks&returns play. "Risks" pf Political&Regulatory&Currency&Macro issues very often give you "return" of double-digit market growth, digitally untapped verticals, lower multiples etc.
2. Currency risk in Brazil isn't such a drama, especially compared to other EMs. There was a 40% depreciation in the beginning of COVID, otherwise last 4 years has been pretty stable at even more appreciation periods. Not a guarantee of course if other macro could come into play to adverse things, but still pretty much favourable compared to other EM peers.
3. TAM - agree on market opps. Brazil is a highly entrepreneurial country with around 1M net new micro/SMBs setup each year, depending on the economy cycle.
4. Valuations - while multiples are of course being exposed to country risk, strong assets aren't being too discounted to developed countries comparables (meaning Western Europe in this ex.). I'm currently talking LOI at 7-9x EBITDA with several European and local buyers. Again, I mean strong quality assets, like double digit ARR grow, 30%+ EBITDA margin etc.