Banco de Fomento “has practically contracted 900 million euros” from the PRR

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“What we have practically contracted (with venture capitals and directly) – in the consolidate and start-up programs – is close to 900 million euros, from January 2023 until now, which was tough”, revealed the president of BPF at the Conference “Consolidate to Grow – The role of M&A in the competitiveness of the economy”

Celeste Hagatong, president of the Board of Directors, spoke at the Conference “Consolidate to Grow – The role of M&A in the competitiveness of the economy”, organized by Jornal Económico.

“Banco de Fomento is managing PRR funds for capital and quasi-capital in the amount of 1.3 billion euros, and has two tranches in each of the programs. One to consolidate companies (Programa Consolidar) and there is a program for companies that are in the first phase”, recalled the manager.

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), with an initial global allocation of 1,300 million euros, the fund ended 2023 with 864 million euros in contracted operations, representing 67% of the global allocation and exceeding the target of 650 million euros, set out in the Agreement, by 214 million euros (around 33%). Operational of the reprogrammed PRR.

It is worth remembering that Banco de Fomento launched the Deal-by-Deal Co-investment Program and the Venture Capital Program that are aimed at small and medium-sized emerging and high-growth companies, known as start-ups and scaleups.

“The two programs (Consolidar and Start-ups) have two forms of distribution, either the companies go to the bank or we select the venture capitals and the companies go directly to the venture capitals and these are the ones that manage small tranches of the global volume” , explained Celeste Hagatong.

“What we have practically contracted (with venture capitals and directly) – in the consolidation and start-up programs – is close to 900 million euros, from January 2023 until now, which was tough”, revealed the president of the BPF.

Celeste Hagatong also spoke about the lack of human resources at Banco de Fomento and pointed out the difficulties of “dealing with the State”. The promotional bank needs regulatory authorizations to recruit.

The strategic recapitalization program, which BPF manages directly, “line has around 200 million and is for capital or almost capital, at the moment operations that are above 50% of this line have already been approved and we already have operations in the pipeline”.

The Consolidar program is worth around 500 million and is practically all contracted with venture capitals, he added.

“We do not enter these companies alone, it is mandatory under the program rules that there is at least 30% of independent private capital (from the company) that enters the capital”, he explained.

In the Consolidate program, the maximum contribution by the FdCR (Capitalization and Resilience Fund) is 70% of the total allocation of each risk capital fund. Therefore, the funds are able to leverage at least 30% of the amount to invest in companies.

This program is intended to support the subscription of venture capital funds for investment in SMEs and Mid Caps, impacted by the Covid-19 pandemic, but economically viable and with recovery potential.

The Consolidar Program aims to promote growth, expansion, consolidation of business projects, as well as the development of “There are new business areas and new products here, through the restructuring of the respective business models and the professionalization and reinforcement of the Beneficiaries’ management team Finals.

“There is a point here that raised problems, which refers to the fact that acquisitions with PRR funds are not included in the program. Public funds cannot be used to finance an acquisition, but they can be used to invest in restructuring”, explained Celeste Hagatong, who highlighted that it is a European Union rule.

“Now mergers can do whatever they want,” he said.

“In a country that has little capital, I would say that it makes sense to look more at mergers, bringing together two capitals and creating a bigger company and each shareholder gets half of a bigger company”, defended the manager who recognized that there is difficulty in mergers in Portugal. as a matter of mentality.

“We have more than 300 thousand companies, of which 96% 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 start-ups and innovation companies, while in Portugal is restaurants”, he added.

Celeste Hagatong recalled the fateful sequence of events, Covid-19, the war in Europe, inflation, the rise in interest rates, the Israeli conflict, and to further help the problem of the Red Sea, which is dramatic in exports to Europe.

But there are also opportunities, defended the manager, speaking of the community funds that came to help rebuild the Portuguese economy. These are not just the PRR funds, but also the sectoral funds.

“We can’t help but not use the funds we have access to,” he said.

“These funds require joint work between banks, Banco de Fomento, private equities. If we came together to promote these mergers and acquisitions it would be fantastic, that’s why we have already signed protocols with several banks, but unfortunately we still don’t have results”, he said.

The president of the BPF highlighted that the PRR (Recovery and Resilience Plan) funds were also fundamental to developing private equity activity in Portugal, referring to the Consolidar Program.

“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 of the ways is to have foreign investment, such as Autoeuropa, which created a cluster.

“Consolidating companies is absolutely essential, asking for help from all actors in this ecosystem, we have to make the environment increasingly pleasant for these mergers, especially in the fiscal part, at least up to a certain limit. Finally, I would like to have seen this program (PRR) linked to these companies’ access to the capital market. This is not in the program or in the objectives, but I believe it should be an objective and that it makes perfect sense”, he defended.

Without size, “it is impossible to retain talent, pay better salaries, it is impossible to grow the economy and it is impossible to make the quick investments that the business sector has to make to adapt to new conditions”.

It is necessary to make Portuguese companies more efficient, with greater productivity gains and to be more prepared for challenges. It’s not all buying and selling, it can be organic growth. But it requires new investments.

One of the essential points for companies to gain critical mass is to approach foreign markets and export more. But in the smallest companies, exports are only to one country, one product and with very low values, typical of micro-companies.

“What is important is for a businessman to be a good manager and have ambition”, said the president of the BPF, who cited the “Philosopher’s Stone”, to say that being a good manager is not enough, you need to have a dream to make companies grow.

“What is good about private equities is that they often transform the management of the company, giving it more professionalism and more strategy,” he said.

The phases for companies to grow follow very much a sequence, entry of venture capital, then a phase of bond issuance in the markets and then listing on the stock exchange, highlighted the manager.

“We have to make sure that the funds go out in 2024 and 2025 and that they are delivered to the final beneficiaries. Venture capital estimates are very positive,” she added.

Celeste Hagatong also defended, before an audience including the vice-president of BCP, João Nuno Palma, that the bank “must resume visiting customers”.