With high interest rates and expensive credit, many business owners wonder where to find capital to grow, consolidate their sector or get through a period of financial pressure. One answer may lie in partnering with financial investors – private equity (PE) funds, familiar to some business owners but still little known to many.
These investors remain active in Brazil: in 2025, PE funds completed 119 deals in the country, totaling BRL 56.8 billion, according to TTR Data[1]. In 2026, with capital more expensive, the pace slowed – 56 deals through August (−13%), totaling BRL 34.5 billion[2] – and managers became more selective. Arriving prepared makes even more of a difference. We summarize the main points below.
What are private equity funds and what are their goals?
Private equity funds are run by professional managers as an investment alternative for their clients. They invest in private or listed companies by acquiring or subscribing for shares – becoming partners – or, in some cases, by subscribing for debentures.
Since most deals involve mid-sized private companies (the so-called middle market), this is a higher-risk alternative, and managers seek above-market returns, generally in the range of 15% to 25% a year. Funds, however, bear the same risks as the owner and the business, and returns vary with the performance of the companies invested in.
To deliver the required return, managers mainly assess:
- Growth potential in revenue and earnings – through acquisitions of competitors (consolidating fragmented sectors), fixing inefficiencies (new commercial, accounting, financial and governance practices), attracting talent, new sources of financing and revisiting the organic growth strategy;
- A sector with good growth prospects for the coming years;
- The gap between entry and exit multiples, since companies backed by funds tend to be better priced thanks to improved governance;
- A clear exit after 5 to 7 years on average – usually through a sale to a strategic buyer (a domestic or multinational company in the sector) or an initial public offering (IPO).
What are the most common investment structures?
There are three traditional structures:
- Purchase of shares (secondary or cash-out transaction): the money goes to the selling shareholders;
- Subscription of new shares (primary or cash-in transaction): the money goes into the company. Managers prefer it, since more cash accelerates growth;
- Debentures convertible into shares (mezzanine transaction): the fund initially acts as a lender, with well-structured debt – usually with a 1- to 3-year grace period on principal and below-market interest, which may also have a negotiated grace period. The goal is to follow the company's progress and convert the debt into shares if performance meets or exceeds the agreed plan.
Which fund profile fits your moment?
Every business owner has their own management style and personal and professional goals, and knowing them well is essential to choosing the right fund. In short, there are passive and active funds with regard to management, and day-to-day interaction differs radically between them.
Passive funds usually acquire minority stakes and act as qualified supporters of current management. Through the board, they help discuss strategies and improvements. With experience across many businesses and a broad network, they make it easier to attract talent, access new types of financing and pursue acquisitions, among other corporate development fronts. They typically appoint a CFO they trust or, at a minimum, validate the management model.
Active funds in most cases take a majority position, although control may be shared. They are more intensely involved in operations; in some cases the founder steps back from day-to-day management and becomes an advisor to the business. Choosing key executives and strategic decisions become mainly the new partner's prerogative, to accelerate growth.
Another point is sector knowledge. Many funds are generalists, with portfolio companies across several sectors. There are also specialized funds – in education, healthcare, technology or agribusiness, for example – which can create synergies among portfolio companies and improve growth and profitability prospects.
In times of crisis and financial stress, funds focused on companies facing financial or operational difficulties – known as distressed funds – gain prominence. Focused on restructuring, they may take a more financial approach – reshaping and renegotiating liabilities – or an operational one, implementing improvements that restore profitability.
What are the main points of attention?
Before looking for a financial partner, we highlight four aspects that are key to the success of the transaction and of the relationship afterwards:
- Do your homework. Reflect on your profile as a manager and your goals for the coming years – this guides the choice of fund. Also take care of accounting and financial organization: in due diligence, liabilities and contingencies (labor, tax, environmental, etc.) that have not been understood, mapped and, as far as possible, mitigated can derail the deal. Efficient financial controls are indispensable.
- Choose a good financial advisor. The advisor helps highlight the strategic qualities that support the investment thesis, defends the valuation technically and discusses contingencies with investors to maximize the value of the business. The advisor also runs a structured, competitive process that lets you meet several funds at the same time, preserves confidentiality and supports the negotiation of the memorandum of understanding, the contracts and the shareholders' agreement.
- Choose a good law firm. Corporate lawyers with M&A experience are essential to defend your interests in the contracts and shareholders' agreement and to formalize what was negotiated on governance and management. Clauses such as tag along, drag along, veto rights, appointment of executives, board tie-breakers, anti-dilution and call and put options should be discussed in the final stage of the process.
- Do due diligence on the fund. Before deciding, talk to companies the fund has invested in or that have worked with its managers. Draw on the experience of those who have lived the pros and cons of this partnership – it reduces surprises in the relationship after the transaction.