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Case Study

Senior Solution: The IPO

By Nuno Fernandes

10 pages

August 2016

Reference: IMD-7-1782

Senior Solution, a São Paulo-based IT company specializing in software development and solutions for financial institutions, was founded in 1996 by Bernardo Gomes and Luciano Camargo. In the late 1990s, the company focused on customized IT projects and maintenance. Its business grew from BRL 0.2 million to BRL 7 million in 2002. By 2004, there was increasing consolidation in the banking sector in Brazil, with several mergers taking place, posing both challenges and opportunities for companies like Senior Solution. The sector was highly fragmented with more than 150 providers, none of which held more than 5% of the market. In late 2004, Senior Solution closed its first merger with NetAge, a slightly smaller competitor specializing in treasury solutions. In 2005, after a strong growth period, the company announced changes in its shareholder base when Stratus, a private equity investment company focusing on Brazil’s mid-tier market, bought shares to the value of BRL 2.5 million, 20% of Senior Solution’s capital. A rigorous M&A strategy followed with further acquisitions in 2006, 2007 and 2010.

Learning Objective

The case provides an opportunity to discuss the links between finance and strategy. It also allows an analysis of capital raises, underpricing and valuation, emerging markets, IPOs and ownership structures, PE investors, and growth strategies in creating firm value. And it provides an opportunity to analyze a variety of strategic, organizational, financial and economic issues associated with emerging markets.

Keywords

Initial Public Offering, Governance, Mergers and Acquisitions, Value, Voting, Capital, Emerging Economy

Settings

Brazil
Manufacturing, Technology, Finance and Insurance
2012-2013

Type

Field Research

Available Languages

English

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Case reference: IMD-7-2583 ©2024

Summary

LPX AG, founded in 2004 by Michel Degosciu and Robin Jakob, is a leader in listed alternatives, focusing on listed private equity (LPE) and listed infrastructure. With its pioneering LPX Listed Private Equity Index series and NMX Infrastructure Index series, LPX provides essential benchmarks and innovative index-linked products used globally by asset managers. In February 2024, Michel returns from a skiing holiday, ready for a pivotal business trip to Sydney. He will meet with an investment advisory firm interested in developing new financial products based on LPX’s flagship indices, LPX50 and LPXBO. This meeting is crucial for enhancing LPX’s global market presence. Michel anticipates rigorous scrutiny from the Sydney analysts on the risk metrics and performance of LPE stocks. He plans to present a detailed analysis, showing when LPE stocks excel and underperform, integrating comprehensive risk factors for a nuanced understanding. The LPX50 Index captures the performance of the 50 largest LPE companies worldwide, while the LPXBO Index focuses on buyout strategies. Both indices have demonstrated superior long-term performance compared to the MSCI World Index, though with higher volatility. Michel's analysis reveals that LPX indices offer risk-adjusted returns comparable to the MSCI World Index. Employing the capital asset pricing model (CAPM) and a six-factor model, Michel quantifies the indices’ market risks and performance drivers, showcasing LPX’s sophisticated analytical capabilities. His goal is to demonstrate LPX’s expertise and the compelling investment potential of LPE, aiming to attract global investors and solidify LPX's reputation for future growth.

Reference IMD-7-2583

Organization LPX Group

Industry Finance and Insurance, Financial Services

Available Languages English

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