Brazilian-style ‘Succession’ on the Stock Exchange – 06/11/2023 – Marcos de Vasconcellos

The phenomenon of popularity of the HBO series “Succession”, after its end last month, left a flea behind the ear of investors who followed the saga of the Roy family. Filtering out the dramas of the characters and their perversions, there remains a long discussion about the succession of family businesses and an important question: which of our investments are subject to personal issues and those of the families of their controllers?

A movement that took place this month yields good stories for those who want to follow the bloody bowels of the corporate world: CVC, the tourism giant and the only national in the sector in our Stock Exchange, returned to the reins of the Paulus family.

In 2010, they sold control of the company to an international fund, for a whopping R$700 million, according to news at the time. Adjusted for inflation, today it would amount to R$ 1.54 billion.

In 2018, the founder of CVC, Guilherme Paulus, left the company for good. A year later, he admitted to having paid bribes of R$ 39 million to rid his companies of millionaire fines. When the case came to light, CVC was able to say publicly that he no longer occupied any of the company’s staff.

It turns out that the last years without the family were painful for the company. The Covid-19 pandemic brought down the tourism sector there in 2020 – and the resumption seems much more difficult for it than for its peers.

See the numbers. From January 2020 until today, CVC shares (CVCB3) have accumulated an 88% drop. In the national aviation companies, Gol and Azul, the accumulated declines in the period are 75% and 65%, respectively. Among international competitors, Booking draws attention, as it has already accounted for a 26% increase in paper prices since then.

CVC’s uninspired solution to trying to get back on track is to reconnect with the family that created it. The founder, Guilherme Paulus, pledged to inject BRL 75 million into the company, in exchange for a share of shares, with a nice discount on the price.

With Paulus, Fabio Martinelli Godinho also returns, who assumes the position of CEO of the company. A trusted man in the family, he participated in the sale to the foreign fund and in CVC’s IPO itself.

The tourism giant is a precise example of the dilemma between leaving a large corporation in the hands of a family or leaving its more professional management, in the hands of people who do not know the business in such detail.

The risks of family management of large businesses permeate the entire plot of the acclaimed “Succession”. It is up to the investor to understand how, in these cases, his “vote of confidence”, when buying company shares, extends even further to the people involved in the company’s management.

In addition to CVC, which now returns to the Paulus family, our Stock Exchange has other examples that must be on the radar of investors. In the family business index (Family Business Index), made by the consultancy EY, with the University of St.Gallen, Brazil has 11 of the 500 largest companies considered family in the world.

JBS, by Batista; Metalúrgica Gerdau, owned by the Gerdau Johannpeters; and CSN, whose handover to Benjamin Steinbruch’s daughter, Victoria, has already been covered in the news. They draw attention for their size and concentration of control.

It is neither necessary nor advisable to follow the life of the controlling families as a series, but by seeking clear succession plans, investors can avoid becoming part of the soap opera.

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