BRAZIL'S MID-MARKET The Sao Paulo-Frankfurt connection

Hans Apostel moved to Sao Paulo from his native Germany in 1978 to work for the German business consultant Roland Berger. Sao Paulo had developed a significant cluster of major German corporate divisions and it was Apostel's job to sell them strategic advice.

As the turbulent late 1980s and early 1990s arrived, many of these clients were eager to unload their Brazilian operations, and Apostel joined with other German expatriates to buy some of these, later exiting them to the first wave of buyouts in the country in the mid-1990s.

After a stint back in Frankfurt pursuing investment opportunities, Apostel has decided that the time is right to begin another round of acquisitions in Brazil. He and a small handful of Brazilian business veterans have launched OSF Merchant Banking in Sao Paulo. The firm has not officially announced the other partners beyond Apostel, but a marketing document notes “a former senior partner of Permira… and the [former] CEO of the BASF Brasileira group”.

The firm will begin raising a fund early in 2010, although a first round of deals will be financed by the partners and several institutional investors. The firm will target “hidden champions” in the Brazilian mid-market, which will benefit from OSF's knowledge of “international counterparts” to join with, according to the document. OSF will provide both equity and debt to its target companies.

In a statement, Apostel has said of the new Brazilian opportunity: “We are entering a third cycle now with strongly capitalised global PE firms parachuting left and right into Brazil looking for transactions with substantial deal size … Brazilian funds will play a smaller role, particularly in the light of a process in which the local pension funds, sole providers of long-term capital in the country, are re-defining their role and governance regarding alternative assets.”