By Andrea Hargraves 
“What we have contracted in practice (with venture capitals and directly) – in merger and start-up programs – is close to €900 million, from January 2023 until now, which is difficult,” the BPF president revealed at the conference. “Merger for Growth – The Role of Mergers and Acquisitions in the Competitiveness of the Economy”
Celeste Hagatong, Chairman of the Board of Directors of Banco Português de Fomento (BPF), was speaking at the conference “Consolidar para Crescer – The role of mergers and acquisitions in the competitiveness of the economy”, organized by Jornal Económico.
“Banco de Fomento manages equity and quasi-equity PRR funds in the amount of €1.3 billion, and has two tranches in each program. One is for consolidation of companies (Programa Consolidar) and there is a program for companies that are in the early stage.”
The head of the BPF revealed that “what we have contracted in practice (with venture capital and directly) – in merger and start-up programs – is close to 900 million euros, from January 2023 until now, which is difficult.”
The BPF President referred to the fact that the Capitalization and Resilience Fund (FdCR), launched in the context of the Recovery and Resilience Plan (PRR) and managed by Banco Português de Fomento (BPF), has an initial global allocation of €1,300 million, having ended 2023 with €864 million. In contracted operations, representing 67% of global allocations and exceeding by EUR 214 million (about 33%) the target of EUR 650 million, set out in the operational agreement of the rescheduled PRR programme.
“The two programs (Consolidar and Start-ups) have two forms of distribution, either the companies go to the bank or we choose the venture capitalists and the companies go directly to the venture capitalists and they are the ones who manage small tranches of venture capital.” Global size,” explained Celeste Hagatong.
It is worth noting that Banco di Fomento launched a deal-by-deal co-investment program and venture capital program targeting small, medium-sized and high-growth startups, known as start-ups and start-ups.
Celeste Hagatong also spoke about the lack of human resources at Banco de Fomento and pointed to the difficulties of “dealing with the state.” Promo Bank needs regulatory licenses to employ.
The strategic recapitalization programme, which is directly managed by BPF, consists of a pipeline of around 200 million and is almost all capital or equity allocated, “At this moment, operations over 50% of this pipeline have already been approved and we already have operations in the pipeline.” .
Consolidar's program is worth about $500 million and is almost entirely contracted out to venture capital, he added.
He explained: “We do not enter these companies alone, it is mandatory under the rules of the program that there is at least 30% of independent private capital (from the company) entering the capital.”
In the consolidation programme, the maximum FdCR (Capitalization and Resilience Fund) contribution is 70% of the total allocation to each VC fund. Therefore, the funds are able to utilize at least 30% of the amount to invest in companies.
This program aims to support subscription to venture capital funds to invest in SMEs and mid-cap companies, which have been affected by the COVID-19 pandemic, but are economically viable and have the potential to recover.
The Consolidar program aims to promote growth, expansion and consolidation of business enterprises, as well as to develop “new business areas and new products here, through the restructuring of relevant business models and the professionalization and strengthening of beneficiary management.” Team finals.
“There is a problematic point here, which refers to the fact that takeovers with PRR funds are not included in the programme. Public funds cannot be used to finance a takeover, but they can be used to invest in Restructuring”.
“Now mergers can do whatever they want,” he said.
“In a country with little capital, I would say it makes more sense to look at mergers, combining two capitals and creating a bigger company and each shareholder getting half of a bigger company,” defended the manager who realized that mergers in Portugal were difficult. Mentality.
He added: “We have more than 300 thousand companies, 96% of which are micro companies with low added value, because if we compare with other European countries, the added value of these micro companies is greater because they are emerging companies and innovation companies, while he added: “In Portugal there are restaurants.” “.
Celeste Haggatung recalled the fateful sequence of events: Covid-19, war in Europe, inflation, rising interest rates, the Israeli conflict and, to help further, the Red Sea problem, which represented a dramatic rise in exports to Europe.
But there are also opportunities, defended the manager, speaking of the community money that has come in to help rebuild the Portuguese economy. This applies not only to poverty alleviation funds, but also to sectoral funds.
“We can only use the funds we have access to,” he said.
“These funds require joint work between banks, Banco di Fomento and private equity. If we come together to promote these mergers and acquisitions it would be great, that is why we have already signed protocols with several banks, but unfortunately we are still not getting results,” he said. .
The BPF President stressed that the Recovery and Resilience Plan (PRR) funds were also key to the development of private equity activity in Portugal, referring to the Consolidar programme.
“I can say that in the last competition for the venture capital program, the number of proposals exceeded 60 and the amount of funds was three times the amount available,” said Celeste Hagatong.
What can be done to consolidate companies? One way is to get foreign investment, such as Autoeuropa, which has created a group.
“The consolidation of companies is absolutely necessary, asking for help from all actors of this ecosystem, and we have to make the environment increasingly pleasant for these mergers, especially in the financial part, at least to a certain extent. Finally, I would like to see this program (PRR) “Linked to these companies' access to the capital market. This is not in the program or in the goals, but I think it should be a goal and it should be completely logical.”
Without scale, “it is impossible to retain talent, pay better salaries, impossible to grow the economy, and impossible to make the rapid investments that businesses need to make to adapt to new conditions.”
It is essential that we make Portuguese companies more efficient, with greater productivity gains, and better prepared to face challenges. It's not just buying and selling, it can be organic growth. But it requires new investments.
One of the key points for companies to gain critical mass is to approach foreign markets and export more. But in small companies, exports are only to one country and one product and at very low values, as in small companies.
“What is important for an entrepreneur is to be a good manager and have ambition,” said the BPF president, citing the “Philosopher’s Stone”, to say that being a good manager is not enough, you must have a dream. To make companies grow.
“The good thing about private equity is that it often transforms the management of the company, giving it more professionalism and more strategy,” he said.
The director explained that the stages of company growth largely follow a sequence, with entry into investment capital, then the stage of issuing bonds in the markets, then listing on the stock exchange.
“We have to make sure that the money comes out in 2024 and 2025 and is delivered to the ultimate beneficiaries. The venture capital estimates are very positive,” he added.
Celeste Hagatong also defended, before an audience that included the Vice President of the Central People's Bank, João Nuno Palma, that the bank “must resume visiting clients.”