UKBrazil joint ventures seminar Brazilian Chamber of Commerce
UK-Brazil joint ventures seminar Brazilian Chamber of Commerce 20 March 2013
UK-Brazil Joint Ventures Seminar London, 20 March 2013
In numbers 35% of global revenues currently from JVs 5, 000 new JVs in past 5 years ~25% of global FDI in BRICs by 2015 398 ‘Brazil inbound’ transactions in 2012 Sources: Boston Consulting Group, Harvard Business Review, IMF, KPMG Research © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2
The word on the street “Joint ventures represent an increasing percentage of our revenue and EBIT. This trend looks set to accelerate. I’m concerned that we’re underestimating what’s involved. ” Head of Strategy, food and drink major “This is a new type of joint venture. Can we ‘stress test’ the deal before we actually sign up our potential partners? ” “We need to invest in building the right capability and skills to ensure we extract maximum value from our JV portfolio, whether we are majority or minority shareholders. ” Head of Production, oil and gas super major “We’ re attracted by the growth prospects in China, but we’re worried about protecting our IP, and whether we can trust our local partners. ” CFO, food and drink manufacturer Head of Operations, extractive industries major “To expand into new markets in our sector we have to use Joint Ventures, with local parties. How do we ensure our partners are aligned with our safety and operating requirements? ” “We want to become as strong at building joint ventures with our partners as we are at building our own brands in the market place. ” Head of M&A, global FMCG company CFO, infrastructure and services company © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 3
What is happening in Brazil – now Deep Sea Supply and BTG Pactual establish a Joint Venture in Brazil's EBX, BP Form Joint Venture to Distribute Marine Fuels “Deep Sea Supply Plc ('DESS') and BTG Pactual Oil & Gás Participações S. A. ('BTG Pactual') are pleased to announce that they have agreed to enter into a joint venture (the 'Joint Venture') for the ownership and operation of Platform Supply Vessels ('PSVs') and Anchor Handling Tug and Supply Vessels ('AHTS') in Brazil. . . ” “SAO PAULO-- EBX Holding, controlled by Brazilian billionaire Eike Batista, announced Wednesday that it is forming a joint venture with BP PLC (BP, BP. LN) to distribute marine fuels. . . The new company will start importing marine fuels during 2013 and selling to clients in the Brazilian market…” Mar 2013 Jan 2013 Vonage announces joint venture with Datora Telecom in Brazil “HOLMDEL, N. J. , Feb. 13, 2013 /PRNewswire/ -- Vonage Holdings Corp. (NYSE: VG) today announced that it has entered into an agreement to form a joint venture with Brazilian-based Datora Telecom to deliver communications services in Brazil…. ” Feb 2013 Latin Gold to form joint venture with Brazilian partner through merger of Latin Gold Project with neighbouring União (Union) Project “International Goldfields Limited (ASX: IGS) ('IGS') has entered into a Memorandum of Understanding ('Mo. U') to form an incorporated joint venture ('JV') between its 93% owned private entity Latin Gold Ltd ('Latin Gold') and Brazil based private entity group Biogold Investment Fund ('Biogold'). . ” Feb 2013 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 4
Key drivers of joint venture activity in Brazil Capital constraints Market entry Joint ventures Legal (or political) requirements ‘Risk reduction’ © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 5
What to watch out for – common JV challenges and pitfalls Security of value extraction Addressing financial reporting upfront Reflecting local sourcing/ staffing issues in the JVA Avoiding artificial deadlines Robust and joint implementation plan Partner selection and assessment Joint Ventures Spelling out roles and responsibilities – upfront and in detail Designing your exit strategy advance Developing a joint business plan and financial model Critically assessing financing /financial covenants Creating a win-win for all parties Agreeing a governance framework with explicit audit rights © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 6
The balancing act of managing the relationship underpins value in the JV Building a good relationship Trust vs. Getting the best deal Valuation ■ Joint business plan Culture and language Structure Alignment Personal incentives ■ Clear, agreed responsibilities ■ A shared JV entity culture ■ Quality communication ■ Early issue detection Collaboration Time pressure ■ Swift issue resolution © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 7
The KPMG Global Joint Ventures Practice – what we do Assurance and governance over an existing JV Creation and negotiation of a new JV ■ Holistic business advice, including strategic, commercial and operational input, to predeal analysis and partner negotiation ■ War gaming of potential future scenarios to identify practical mitigation actions and negotiating points prior to signature ■ Swift, focused diagnostic review, providing experience-based insights and practical improvement actions within an existing JV, partnership or alliance Turnaround and enhancement of an underperforming JV ■ Working with key stakeholders to turn around and re-focus a failing or stalled JV, partnership or alliance Building 'co-operative capability' to successfully deliver multiple JVs and partnerships Cooperative capability health check ■ Health check of capability to deliver cooperative strategy ■ Benchmarking and gap analysis against best practice – people, process and skills Cooperative capability design and implementation ■ Tailored programme to bridge gaps and make capability fit for purpose and focused on delivering anticipated value and competitive advantage Training and Coaching ■ Customised senior stakeholder and/or functional workshops plus one-to-one follow-up and 'on the job' coaching © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 8
Thank you Daniella T. Carneiro Nicklin Global Joint Ventures Practice T: +44 (0) 79 2076 7419 E: daniella. carneiro@kpmg. co. uk © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Produced by Create Graphics
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).
UK-Brazil joint ventures seminar David Sonter 20 March 2013
CASE STUDY EM&I (Maritime) Ltd EM&I Odebrecht Alliance 12
BRAZIL • Nature of business • Integrity Management of FPSOs • Like the Doctors & Surgeons who look after them from the ‘cradle to grave’ and keep them ‘fit for purpose’ throughout their working life – usually around 25 years - with the minimum of unplanned shutdowns & maintenance. 13
BRAZIL • • Desk Research UKTI & Brazilian Chamber of Commerce Brazilian Chamber Gala Dinner – London Exploratory visit (UKTI report vital) Checked out potential partners Visited clients Follow up - vital 14
BRAZIL • Second visit with CEO to check out potential partners and visit clients • Concentrated on Rio & Macae • Asked clients about potential partners • One name recognised by all (Odebrecht) • Managed to convince this company to be our partners. Actually they jumped at the chance! 15
BRAZIL • Detailed discussions with Brazilian partner culminating with meeting in London to agree the way forward • Invited key Brazilian staff to attend a global workshop of senior EM&I staff and visit to Aberdeen base to observe digital radiography and rope access techniques. 16
BRAZIL • Arranging meetings in Brazil can be a challenge. They will never commit themselves until just before the date, and their programme is constantly changing, so you have to very ‘fluid’ and expect the unexpected. • Make the most of ‘opportunist events’. JETCO meeting in London (Nov 2011). OTC in Brazil (Oct 2012). FPSO Forum, Buzios, Brazil (Sept. 2012) 17
BRAZIL • Visit of CEO, COO, and senior operational staff to Brazil to check out facilities and logistical problems of relocating staff to Brazil. • Visit of Technical Director to train Brazilian staff and visit clients. • Visit of BD Manager to present paper at the Rio Oil & Gas Conference and introduce some exciting new technology to clients. 18
BRAZIL • We have helped our partner to move ’up market’ into the more sophisticated and complex areas of the Integrity Management market. • They have good connections with Petrobras and we can benefit from this. • Have had to make all the running – you cannot leave arranging meetings to your partner. They are not used to ‘obtaining’ enquiries. 19
BRAZIL • Awarded first contract by client which became a $multi million project. • This was a client who knew us from the North Sea some 25 years previously. • Our Brazilian partners were already working for his company and were approved contractors. • Choice of partner critical in this respect. 20
BRAZIL • Attend relevant functions in London – Casa Brasil conferences in conjunction with the 2012 Olympics • Brazil Day function at Lancaster House • Getting CEO invited to meeting with PM • Getting CEO invited to travel with PM to Brazil 21
BRAZIL • FPSO Forum in Buzios in October 2012 • Macae Offshore expo & conference in June 2013 • OTC conference in October 2013 • Make maximum use of relevant events. • Be persistent • Keep on coming back 22
BRAZIL RECOMMENDATIONS • Do thorough research • Use UKTI to get a ‘flying start’ and hit the ground running. • Clients don’t take you seriously until they’ve seen you at least three times, so keep on coming back. • Use your partner’s knowledge & skills to the maximum 23
BRAZIL Factors to consider: Set up Brazilian company to protect intellectual property Double taxation: Brazil has double taxation agreements with a number of countries but NOT the UK. Type of JV or License. Consortium or full JV? Local partner needs to advise on labour & taxation legislation / laws, etc. , as this is a minefield 24
BRAZIL • Important for senior staff to be involved • Clients take you much more seriously if the CEO / COO / CFO visit at key stages. • Appoint your own local lawyer. UKTI can advise on this • Any agreements will generally have to be according to Brazilian law & Portuguese the authoritative version. 25
BRAZIL • We prefer a 50/50 arrangement with both sides having two directors on the board – who appoint the Director in charge of the JV. • UK staff will be deeply involved in the early stages, but will gradually hand over to local staff as they become more experienced. • Costs for UK staff involved will be charged to the JV for time in Brazil. 26
BRAZIL CONCLUSIONS Promising market with a stable democracy Nice people to deal with Safe & secure environment compared with many other parts of the world. • Most senior business executives speak English • Infrastructure & energy sectors are booming. • • 27
Brazil Chris Wall Business Specialist UKTI High Value Opportunities Programme Mobile: 07954 433169 chris. wall@uktispecialist. com 28
High Value Opportunities Programme – Brazil - Hotspots Sports Infrastructure • not only 2014 & 2016 • not only stadia 29
High Value Opportunities Programme – Brazil - Hotspots Oil & Gas Sector • offshore construction & services • subsea 30
High Value Opportunities Programme Brazil How UKTI supports UK businesses looking to enter the Brazilian market • The ITA network • Missions & Fairs • Tailored support from UKTI overseas • The High Value Opportunities Programme 31
High Value Opportunities Programme Brazil The High Value Opportunities Programme • Huge projects across many sectors • Going for UK accessible value • Working with the main contractors • UK partners & supply chain development 32
Petrobras Business Plan 2012 -2016 • FPSOs • Drillships • Offshore Engineering • Project Management • Operations & Maintenance services 33 33
High Value Opportunities Programme Brazil Prime contractors in Brazil • Petrobras Business Plan 2012 -2016 • Camargo Corrêa • Mendes Júnior • Sports Infrastructure • PPP Carvalho Hosken & Odebrecht • Stadium Operators 34
Brazil Chris Wall Business Specialist UKTI High Value Opportunities Programme Mobile: 07954 433169 chris. wall@uktispecialist. com 35
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