Bloomberg Línea — The mergers and acquisitions market for technology companies remains heated amid a more complex scenario of high interest rates and high inflation. Road transport unicorn Frete.com (formerly known as CargoX) has 300 million reais ($55 million) in cash to spend on the purchase of tech companies in Brazil. And new Chilean unicorn Betterfly has bought fintech Flexoh to launch its operations in Europe.
On Monday, Mexican mobility startup Urbvan was bought by Swvl Holdings Corp for $82 million, providing an exit for Kaszek, Angel Ventures, DILA Capital, Mountain Nazca, Capria, Liil Ventures, and angel investor Kevin Efrusy, who invested in the startup.
Last Friday meanwhile, Brazilian fintech Creditas bought the Brazilian operation of Andbank for 500 million reais ($92 million) and also acquired Kzas, for an undisclosed amount, to enter the home loan market.
Brazil’s big bank Itaú acquired Avenue Securities on the same day.
In early July, Brazil-based unicorn Hotmart bought eNotas, a company that offers solutions for the automatic issuance of electronic invoices, while at the end of May, Norwegian company Visma bought Peruvian startup Mandü, a human resources software company.
According to a Transactional Track Record (TTR) report, the number of Latin American M&As increased between January and May 2022 compared to the same period last year. Brazil, Mexico, Chile, Colombia, and Argentina are, respectively, the five countries with the highest volume of transactions that have closed since January.
According to data from innovation platform Distrito, in Brazil, half of the M&As in the first half of the year had a startup as a buyer.
In the first six months of the year in Brazil, Gupy bought its competitor Kenoby for 500 million reais ($92 million), fintech VADU bought Gesplan for 40 million reais ($7.5 million) and JSL bought logtech Truckpad for 10 million reais ($1.86 million)
“The correction in valuations that technology companies are experiencing makes them more accessible to acquisition opportunities,” said Gustavo Araújo, CEO of Distrito.
And companies from outside Brazil are also keen to take advantage of “lower prices” to buy in the country.
Colombian company Truora recently announced the acquisition of ZapSign in Brazil, while Israeli decacorn Rapyd said it was evaluating possible acquisitions in the country.
Frete.com, meanwhile, intends to analyze more than 20 transactions in the next 24 months, according to the company’s CEO and co-founder, Argentine Federico Vega.
Frete.com is a platform that helps truckers find cargo in real-time. “The trucker does not travel empty, he finds cargo to haul and return and thus has a profit up to 50% more than the offline market. In the offline market today the idle capacity is between 40 to 60% because they keep looking for cargo,” Vega said in an interview with Bloomberg Línea. The company’s business model is similar to that of Chinese company Full Truck Alliance, which raised $1.6 billion in its IPO in January last year.
For the cargo owner, the savings are around 25%, according to Frete.com. “Besides not being empty, the trucker is sure to receive the money for that freight, and the cargo owner is sure he won’t be robbed,” Vega said.
Today the company has 1,000 employees and this year hired just over 400. Until the end of the year, the idea is to hire 350 more people. According to Vega, the startup will not be laying off employees, but there are constant “changes” due to performance. By the end of the year, Frete.com will have 1,400 people.
For Vega, the idea of the acquisitions is not to buy the client base, but the teams. He says he will not do as Brazil’s proptech unicorn Loft did, which laid people off, attributing the redundancies to its spending on acquisitions.
Vega says Frete.com is different from other startups that had to sell cheaper to gain scale - and needed outside capital to do so. Frete.com connects two parties on a platform and charges for that connection, so it hasn’t had to buy something and sell it cheaper to grow.
“We’ve always had a big margin. At a time when the market turns and there is less investment, basically what we do is hire slower and invest less in marketing to lose less money,” he said.
According to the CEO, the $55 million set aside for acquisitions comes from just over $370 million the startup has received in recent years, money that had not been spent precisely because of the high margin.
“There are a lot of companies that are not able to raise money but have good technologies. Those companies can benefit from our money and our operation,” he said.
Frete.com does not disclose revenues but says it has 140,000 client companies that post loads monthly on its platform and more than 800,000 active truckers, and who earned more than $19 billion on the platform in 2021, according to Vega.
“I don’t want to buy traditional companies or companies that use technology to improve operations. We are looking for software companies, natively digital,” said the executive, who intends, with the acquisitions, to set up an ecosystem for cargo transport in Brazil.
“We can buy several companies or just one, depending on what we find. We are not venture capital. We are looking for M&A and companies that can benefit from the capital.”
