Crains Detroit Business - Q&A: Marco Stefanini on growth via acquisition and maybe an IPO

July 02, 2021 by Stefanini

This interview was originally pubslihed at Crain's Detroit Business. Access the article here: https://www.crainsdetroit.com/technology/qa-marco-stefanini-growth-acquisition-and-maybe-ipo

With about 27,000 employees in some 40 countries, and a North American base of operations in Southfield, Brazilian tech consulting firm Stefanini Group continues its hunt for growth via acquisition, and other tactics.

The company employs about 400 in Southfield and 2,500 in the U.S. Marco Stefanini, the 60-year-old Brazilian founder and CEO of the company, said in an interview with Crain's last week at the company's Southfield office that the company has been — and will continue to be — aggressive in pursuing acquisitions of smaller tech companies that can become business units within Stefanini Group. Over the last five years, Stefanini has completed 13 global acquisitions or joint ventures.

Additionally, the CEO of the company — which has more than $1 billion in annual revenue — said he's not ruling the idea that Stefanini could go public in the future.

How would you describe the company's growth strategy and breakdown between organic growth compared with acquisitions?

Some initiatives we began (from scratch), but most of them we acquired when they were very small. Our strategy is growing together. Then — usually, not always but usually — we keep the shareholders as the leader of the company, and we work together because we add for them, a lot of things. For example ... labor force, technology. (This) helps them grow more. This is a very (entrepreneurial) model.

What do you mean by that?

The idea is we have a model that we give (the company) more autonomy (on) the front line. Usually, we work as a business unit, and they have more autonomy to manage their business. In this model, we understand that the entrepreneurs (whose companies we acquire), they are more comfortable to work with (this model).

What needs are you trying to fulfill with acquisitions?

One side is more traditional service for the IT guys, the CIO, the IT structure. But also in this area, we are including a lot of digital solutions ... to have a better user experience, to be more efficient.

What are the sizes of companies that Stefanini may target with its M&A deals?

We are not angel (investors looking) to buy a startup, they have some ideas. We are not in this stage. We prefer companies that they already have a product or solution. They already proved their solution or product or market. Maybe a few million dollars revenue per year, or maybe 50 or 100 (million). 

How have client needs changed during the pandemic?

Now we are improving and pushing more what we call a Latin hub. That's near-shore service from Latin America, because we understand now, the North American companies are looking for some alternatives to India. Not to give up being there, but bringing some balance a little bit … COVID showed two things (that India struggled with): if you concentrate all the eggs in the same basket you can have a problem. (It's the) same for manufacturing in China.

The second: The salaries are increasing everywhere, but more in India. Why? Because now we have a remote job. And what's the difference, hiring a good Indian guy here, or in India direct?

Then the word in many North American companies, they are beginning to look for some alternatives (to India). And if you add ... the six or seven largest countries in Latin America — including Brazil that is the largest one — we are talking about a talent pool of around half a billion people. It's a lot of people.

How do you see things changing for Stefanini in the coming years?

Until today, we've done our acquisitions, our growth, only with our own capital, and the assets in technology, they increase the valuation (of the company). And now … we'll be more aggressive in terms of the size of the acquisitions. And then maybe we'll use some alternatives in terms of investment, because until now we have been an almost debt-free company, and we've never had any investor. (Also), there are some alternatives, (like) the stock market.

So you're saying an IPO could be a possibility down the road?

This is an open space … Everything is open.

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