M&A is the acronym for Mergers and Acquisitions. This process happens when a company wants to buy another to promote its inorganic growth. Either to consolidate its position in a segment, enter new markets, extract cost synergies, or in an arbitrary form, to acquire an asset. Financial advisors, such as BR Partners, advise on these negotiations, charging a fee on the service provided. In general, M&A transactions consist of a few phases, such as: receiving and negotiating an offer, legal and accounting diligence in the target company and, finally, negotiation and singing of the final documents.

Joint Venture (JV) is a business arrangement in which two or more entities come together to combine resources to achieve/conquer a specific goal within a defined period. The entities involved share revenues, costs, and profits obtained in the project. The interests to form a JV are diverse, such as: joining forces to raise funds for the project, costs synergies, shared and combined expertise in a specific subject, and entry into new or foreign markets.

This is an advisory whose objective is to help companies make decisions with solutions that allow them to settle their financial obligations and liabilities. As a result, we offer specialized solutions that make our clients’ business viable, such as advising on the divestment of non-core assets, liability management and optimizing capital structure, and counselling on judicial recovery. .

Privatizations are processes in which a state-owned company or asset is sold to a private institution, taking away the administrative role of the State.

Fairness Opinion is an independent external opinion of an expert in a third-party financial transaction, such as an M&A.

Board Advisory consists of providing an independent external opinion to the client’s board of directors to advise them on strategic decision-making in specific situations such as M&As, Joint Ventures, and Privatization.

It is the remuneration model in which the percentage of nominal value charged by the advisory is due to the performance of the project or service provided. In this way, Investment Banks that use this means of remuneration end up charging the service fee only when the negotiation has already been 100% concluded, including with the approval of the Administrative Council for Economic Defense (CADE).

Mortgage-Backed Securities – Fixed income securities that represent the promise of future payment for a good or asset related to the real estate sector. Allowing the issuer of the paper to have greater liquidity when compared to investing in real estate, as it is easier to redeem the amount invested. An example of how this debt instrument works: a construction company sells a few unfinished units of its new venture. Instead of the company waiting to receive all the installments, the payment is made in advance by contracting a securitization company that transforms these debts into credit securities, which investors can purchase. In addition, this instrument is considered a fixed-income asset since the papers are indexed to specific rates and have expiration dates, so investors have a predictable return. .

Asset-Backed Securities – It is a fixed income security that represents the promise of future payment in cash for a good or asset related to the agribusiness sector. It works the same way as MBS. However, ABS are used as financing instruments for the agricultural sector. For example, a company needs capital to purchase new crops machinery, rather than going for a loan at a traditional bank, the producer can use a securitization company to structure this debt of acquiring new machinery into a debt title.

Those are securities issued by companies and traded in the capital markets. In other words, it is how companies issue debt papers into the financial market to raise funds with more flexibility, interest rates that are generally cheaper than traditional financing, and without having to sell equity shares. In this way, these titles have terms and remuneration format defined in the emission date by the company. In addition, there are some differences between debentures. They can be classified into different segments as listed below. Some papers have guarantees for the buyers if the company fails to meet its payments obligations.

Convertible debentures: are those that can be converted into company shares. That is, part of the investor’s money that would be paid with interest can be paid in the form of shares;

Exchangeable: are convertible debentures. However, it can be converted into other company shares, not necessarily from the issuers;

Simple debentures: traditional debentures that cannot be converted into shares. The investor receives interest on the principal;

Incentivized debentures: are exempt from income taxation. They are for the country infrastructure development, mainly transport, logistics, basic sanitation and energy.;

Perpetual Debentures: do not have an expiration date, so the investor continues to receive interest over time according to what has been pre-established;

Shareholder’s Debentures: Instead of remunerating buyers with pre-established interest, this kind remunerates them with part of the company’s profits.

Real Guarantee: Company’s assets in the form of mortgage, garnishment and antichresis;

Floating Charge: Privilege over company’s assets. However, the company can dispose of them without the authorization of debenture holders;

Unsecured Guarantee: no preference over the company’s assets competing with other creditors in the same way;

Subordinated Guarantee: payment preference only over shareholders’ credit.

A bridge-loan is a short-term loan that a company takes out until it has definitively structured a longer-term debt. This type of instrument allows the company to meet short-term obligations, such as debt payments, is commonly used in the real estate sector.

Real Estate Investment Trust: These are investment funds intended to invest exclusively in assets in the real estate sector. REITs are structured to raise funds to acquire real estate, such as farms, offices buildings, and logistics sheds. Or even securities in the industry, such as CRI.

Percentage charged for the service provided, whether in advising on an Investment Banking deal or structuring a debt on the Capital Markets;

This term refers to debt that is structured to replace a short-term loan (bridge loans).

The technical term used to talk about the protection provided by derivatives.

Are financial instruments that have derived values from physical or financial assets, allowing better risk management and ensuring a protection of the asset value against future price variations. Some examples of derivatives are fixed-term contracts, futures contracts, options, and swaps. The Derivatives are traded on the stock exchange and established in pre-determined contracts. Therefore, the characteristics and specifications of the asset (quantity, term, and price) are pre-defined and may have physical or financial settlements. As derivatives are often used in commodities trading, physical settlement can occur and, in this case, the asset must be physically delivered on the expiration date. However, cash settlement is the most used in which the value of the deal is paid to the original buyer on the expiration date.

Agreement after a negotiation between two investors to exchange profitability of two assets. They exchange the cash flow based on each other profitability. This derivative is often used in liabilities management by changing debt indexes. For example, a company issued a debenture indexed to the Selic rate, and through this financial instrument, the company swaps the index to IPCA.

Derivatives in which the buyer acquires the products from a pre-established terms at the time of purchase. Therefore, settlement, quantity, price, and expiration date are agreed upon in advance;

Represent the commitment to buy and sell derivatives at a target price on a previously established future date. Unlike fixed-term contracts, there are daily adjustments: negotiations on these contracts are subject to be assessed every day from the referenced price. In other words, the price of the contract changes every day according to market expectations of the asset value on the end date of the contract. These derivatives are traded at the stock exchange, the daily price adjustment is defined by the average price of exchange operations on future prices of the security. If there is a negative adjustment, the investor must pay for the difference, if positive, the investor will earn the amount. There are two kinds of future contracts divided by their negotiation objective: index (Ibovespa) and Dollar (exchange rate).

Private Equity Funds – funds that invest in public, private or limited companies still in the growth phase, resulting in relevant gains with high potential return opportunities. The fund’s management team participates in the administration of the companies by going to board meetings and helping in the strategic decisions until it reaches maturity to be liquidated by IPO or sold to another investor. In addition, when the fund has third-party capital allocated, management and performance (linked to the fund’s profitability) fees may be charged.

Are two fees charged to initial investors for structuring the investment fund and distributing quotas. In BR Partners, we require these fees in the constitution of FIPs managed by the Investments area therefore, gains originating from the exercise of these fees help compose the area’s revenue.

When an asset suffers reductions in quantity, quality or value, a disparity is created between its book value and recoverable value. This difference causes a cost, the impairment, due to the reduction of the recoverable value.

The revaluation of assets is an accounting calculation performed when the company updates the value of one of its tangible assets, determining the market value of the analyzed asset and its respective update in the balance sheet.

This indicator helps us understand how financially efficient an institution is in the management of administrative and personnel expenses and its operational leverage, which assesses a company’s ability to grow its revenues at a pace higher than the growth of its expenses. The formula for calculating this indicator is: Efficiency Ratio = (Administrative Expenses + Personnel Expenses) / (Net Revenue + Other Expenses).

This ratio explains how much of the Company’s net revenue allocation is to recognition of the performance of the staff, which appears in the results as personnel expenses. This indicator also measures the Company’s ability to maintain a balance between revenue generation and employee recognition. The calculation follows: Compensation Ratio = Personnel Expenses / Net Income.

Acronym for Return on Equity. This is one of the most used profitability indicators to analyze how much value a company can generate for the business and its shareholders based on its own resources. The calculation follows: ROE = Net Income / Average Shareholders’ Equity for the period under analysis.

The Basel ratio is a risk measure that calculates the degree of leverage of banks by relating the reference equity to risk-weighted assets, thus allowing to understand the institution’s equity strength and financial health. In the case of Brazil, the Central Bank requires financial institutions to present a Basel Ratio of at least 8% of principal capital plus an additional 2.5%. The calculation follows: Basel Ratio = RWA (risk-weighted assets) / Reference Equity.

The acronym for Value at Risk. VAR is a method for assessing risk in financial operations. It demonstrates the risk of an investment portfolio through the worst expected monetary loss occurring from changes in prices, interest rates and exchange rates in a given period from a confidence interval.

Acronym for Compound Annual Growth Rate. CAGR calculates the rate required for an investment to grow from its opening balance to its ending balance. The calculation follows: CAGR = [(Final investment amount / Initial investment amount) ^ (1 / Number of periods in years)] – 1

Is the difference between the purchase price and the sale price. When talking about the spread in the banking context, we look at the difference between the interest rate charged on the loans paid by lenders and the bank’s funding rate.

Refers to the cost of raising financial resources.

This expression refers to the regulatory application of equity resources in public financial assets, indexed to the basic interest rate (SELIC).

Refers to capital income from financial assets, usually in the form of interest, that an institution carries on its balance sheet.

This is one of the most common indicators to analyze how much the company’s stock market value corresponds in percentage to its net equity per share. Therefore, indicating how the market values the company with its accounting data. The calculation follows: P/BV = Share Price / Book Value per share.

Multiple that measures the share price with the expected earnings per share to figure if the asset is undervalued or not, by comparing it with the multiples of other companies in the same industry. The calculation follows: P/E = Share Price / (Net Income / Number of shares).

The monetary value of earnings per share available for trading on the market. The calculation follows: EPS = Net Income / Total number of shares.

Common stock grant shareholders the right to vote, allowing them to participate in the company’s decisions.

Preferred stocks give the shareholder preference in receiving dividends. Also, if a company goes bankrupt, this share gives preference for receiving the assets liquidation value and earnings.

Units work as packages containing a mix of common and preferred shares, guaranteeing the holders of unit shares both the right to vote and the preference for receiving the company’s earnings.

Acronym for “Average Daily Trading Volume” is a metric widely used to calculate how much of an asset is bought and sold on average per day during a period.

Is an index used to measure the profitability of a company’s dividends with its share price. The calculation follows: DY % = Dividends per share / Share price.