Brazilian companies undertaking IPOs are reducing their number of bookrunners because several recent deals have been badly executed and overpriced, say experts.
During the recent international financial crisis, many companies borrowed large sums from commercial banks in Brazil to ride out the storm but, as part of the terms of the loans, the banks insisted on being underwriters if the companies went public. This arrangement has proved to be unwieldy and would-be issuers have realized they must reduce the number of bookrunners.
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| from 15 deals so far this year. In 2007 it was $39bln from 85 deals |
Furthermore, during the past year companies have not had to rely so much on bank loans because of the improving financial situation and are thus in a position to cut back on the number of underwriters. "Companies undertaking IPOs started to increase their number of bookrunners last year because they had developed a commercial relationship with some retail banks," says Guilherme Paes, a managing partner at BTG Pactual. "However, I think it is important that there are only two or three underwriters and that they have a wide distribution capacity and strong research team.