As a tale of how emerging market institutions are preying on the West’s fallen angels, BTG Pactual’s acquisition of UBS’s Brazilian business last year is as dramatic as they come. Spearheaded by the now-legendary André Esteves, the $2.5 billion deal is slightly less than the $2.6 billion sum for which Esteves sold the units to UBS as CEO of Pactual in 2006.
BTG Pactual is now one of the largest independent investment banks based in the emerging markets. Capitalizing on UBS’s depleted firepower, the acquisition also reflects the remarkable reversal of fortunes between the Swiss financial firm and the Brazilian star banker.
Esteves left UBS in June 2008 after his bid to snap up parts of its emerging markets business failed. Had Esteves stayed at UBS, his brief would have focused on reducing risk, cutting costs and enacting a more conservative business strategy to satisfy financial regulators.
But at the helm of a bank with, as of March, $2 billion in equity and $34 billion under management, Esteves continues to chase new business. Over the past year, BTG Pactual became the biggest bookrunner of equity deals in Brazil; it shored up its debt distribution capacity; and it is in the process of raising a $1 billion private equity fund. The bank is also firmly focused on internationalizing its brokerage and asset management capacities by opening offices in London and New York.
Esteves’s risk appetite is legendary. At the same time, the woes of his former employer should serve as a cautionary tale of the dangers of expansion mixed with leverage.