New Brazil fund sets sights on mature 5G, renewable energy projects

Oumua Capital debuted this month as Brazil's new search fund.

Search funds are technically a form of private equity, but unlike conventional private equity, these funds look for companies in which the buyer will also take an active role in operating the business post-acquisition.

Oumua Capital aims to invest 120mn reais (US$23.4mn) in a single company, although the final value may vary, and opened registration on its website for those looking to be acquired.

The fund seeks companies with annual operating income of over 10mn reais, mainly in emerging segments such as 5G and renewable energy, followed by agribusiness, Oumua Capital founder André Iaconelli tells BNamericas.  

To that end, it is relying on institutional investors such as Kviv and KYR Capital from Brazil; AIJ Holdings, Inversiones Cabeides, JB46 and Istria from Europe; Alza and Cerralvo from Mexico; and Kinderhook from the US.

In this interview, Iaconelli provides insight into the fund’s focus and targeted companies.

BNamericas: Is there already a company targeted for investment? Or will this only happen after the registration of interested parties?

Iaconelli: It's a work in progress. We have already analyzed more than 200 companies and we have some that are quite advanced in our investment process.

Our team is very active in the search for businesses that fit our thesis, and we also receive many opportunities through partners and even through registrations directly on our website.

BNamericas: When do you intend to complete this process?

Iaconelli: Our schedule is very flexible, but we would like to complete the investment by the end of the year. 

BNamericas: Is there any segment being prioritized? For example, financial, health?

Iaconelli: We really like those related to what we see as the energy and telecommunications transition. Basically, everything related to renewable energies and connectivity, such as 5G or services for distributed generation.

But we're also very interested in opportunities related to services for agribusiness, as we understand that Brazil is structurally competitive in this segment.

However, one of the most interesting aspects of a search fund is that we are opportunity-agnostic and can evaluate good companies in any sector, from chemical products distribution to light-asset manufacturing firms.

BNamericas: Has the fund already raised the projected 120mn reais? Which of the announced investors are leading the investments?

Iaconelli: Our investors work together to finance the contribution, there's no pre-defined leader and the composition of the final investment itself will depend on many factors, such as expertise in the company's area and the final amount to be disbursed.

It's entirely possible that we may enter into a transaction involving new investors who have not yet invested with us. It's a very flexible model.

BNamericas: Does it make sense placing the bet on a single target?

Iaconelli: It's important to emphasize that we're not looking for companies that are still at the beginning of their journey and that still need to prove their product, their business model and even their market.

One cannot compare a search fund investment with other types of private equity participation – companies are different, expected returns are different, corporate strategies are different.

We're looking for a company that is already established, where we can bring innovation and capital to take it to another level, but without jeopardizing what has worked for decades.

With this, we minimize investment risk not by diluting our stake, but by believing that we have the experience and resources to refine what has already worked, which is why our investors are so important.

Focusing on a single company allows us to dedicate all of our resources to making the plan work, and if there's one thing that has historically led to better results, it's focus.