After Cetip, Advent looking for other financial services deals

US private equity firm Advent International is still "actively looking at and very interested in" financial services companies in Latin America, after announcing a 30% stake in Brazilian fixed-income custodian firm Cetip last week, the managing director of Advent's São Paulo office, Martín Escobari, told BNamericas. Advent will be looking for arrangements similar to the nearly 360mn-real (US$171mn) Cetip deal, in which it will take a significant role in the company's management, Escobari said. Asked about midsize bank Daycoval's transaction in February - raising 410mn reais through a subscription share warrant transaction involving US investment firm Cartesian Capital, US-based Wolfensohn Capital Partners and IFC - the executive said such a deal did not really fit Advent's profile. "We're not a debt investor or a minority investor with no or limited management role," Escobari said, noting that the group does have experience with banks in the region, such as when it led the restructuring of Uruguay's second largest bank, Nuevo Banco Comercial (NBC). "In Brazil, there are restrictions on financial investors becoming controlling shareholders of financial institutions, so that makes it hard for us to participate," he said. CETIP DEAL, TRANSFORMATION Advent's interest in Cetip was rooted in its own financial services management experience, coupled with the transformation of the custodian firm from a not-for-profit service provider into a for-profit enterprise. Brazil's central bank BCB and several other market participants set up Cetip in March 1986. It was demutualized in June 2008. "We want to go deeper into that [process] by bringing more aggressive management compensation schemes, more aggressive targets, revamping the new product development processes to meet the pent-up demand for Cetip to be more innovative," Escobari said. In Brazil, all fixed-income instruments must be registered and custodied in a central location, which potentially puts Cetip in a place to be more innovative and critical to the system "Each new product requires customization for the custodian, and there's a backlog that needs to be cleared in order for Cetip to be more broadly accepted," according to the executive. One such product that Cetip will target is calculating and adjusting the fair market value of collateral management deals, in which market participants use instruments in custody as collateral in transactions, he said. As for how the investment will change the company's relationship with the market, Escobari said the move is part of a broader market tendency. "Demutualization is a worldwide trend. So in Brazil, first we had [São Paulo stock exchange] Bovespa, then we had [futures and commodities exchange] BM&F, and now we have Cetip," he said. Advent has offices in 15 countries across Western and Central Europe, North America, Latin America and Asia. Since 1984, Advent has raised US$24bn in private equity capital and has completed more than 250 transactions valued at over US$40bn in 40 countries.