EXCLUSIVE: At Dynamo UK, a Management Buy-Out Opens a New Phase
Cristiano Souza, a Dynamo associate who led Britain’s Dynamo for eight years, is in the process of carrying out a management takeover from the London manager, who will have no connection with the Brazilian company. Cristiano swaps his stake in Leblon for Dynamo and Bruno Rocha’s stakes in the London operation. Bruno, the founder of Dynamo who founded Dynamo UK, will once again be involved in the day-to-day running of the business in Brazil.
A non-crossover will leave Cristiano with the vast majority of the shares, creating a partnership in which partners can grow over time. Dynamo Partners will continue to invest in the fund, which has cars in Cayman Islands and Brazil. Founded in 2006, Dynamo UK today has US$900 million under management and a team of eight people. The company, which will soon adopt a new name, has a concentrated portfolio: 15 positions represent 70% of assets under management.
The manager will create his own back office and trading operations – which are currently shared with Dynamo Brasil. Theo Mesa, co-founder of the extinct Paineiras hedge fund, will serve as the director’s COO. Theo currently lives in London, where he runs a family office. The management takeover is a corollary of the independence the London operation has gained from its parent company – a process that has been on display during the pandemic.
“In practice, we have become an independent manager: we have an active team, with children who want to own the company. Our relationship with Dynamo was more personal than professional,” explains Cristiano, 48, who joined Dynamo at 19. years. . “. The path to independence began with the changes that Cristiano implemented when he arrived in London in 2016. First, there was the renewal of the team of analysts, made up mostly of Brazilians.
“We are starting to realize the importance of bringing experienced people into European companies,” Luiz Orenstein, better known as Lula, one of Dinamo’s biggest partners, told Brasil Journal. “At Dynamo Brasil, we have always been in the classic world of the Brazilian capital market, which does not go much into innovation.”
Today, of the eight in London, only Cristiano and Theo are Brazilian. “People there are younger and have more up-to-date training in terms of schools and environments,” Lula said. “It’s not that Dynamo UK will be a technology or biotech investment company, but its ability to see the technology problem in any business is unmatched by us.” Cristiano also downplayed the corporate world and created new standards for the investment process, and began providing advice to analysts on hedging priorities.
“In Brazil, a Dynamo analyst is free to research investment theses, but it didn’t work when we were talking about the US and Europe,” Cristiano said. With the management buyout, Cristiano intends to re-open funds for funding in the first half. For him, if the company reaches medium-term assets under management of around 4 billion dollars, it will reduce management costs, tie bonuses more closely to performance and increase the relevance of the house to brokers and investors. companies themselves.
Essentially, the new director will maintain the same investment philosophy as Dynamo, seeking market-dominant companies that capture most of their industry’s profits – as close to an “unregulated monopoly with growth” as possible – while at the same time concentrating on the analysis of the incentives of the observers. capacity of management and adaptation of the company.
In addition, the new director recently reduced his coverage to 300 companies. Some of the largest positions held by managers today are Tempur Sealy (owner of 40% of the US mattress market and 90% of the “dividend pool”); RyanAir (owner of 20% of the commercial aviation market in Europe and 60% of industry profits); LVMH (one of the four players that dominate the luxury market with Kering, Chanel and Hermés); Linde (one of three companies that control 85% of the global industrial gases market);
Amazon and two SaaS companies: Appfolio (which has become the dominant software for property managers) and Okta (identity management software which has become the industry standard). Dynamo UK’s current liabilities are well diversified, with international investors representing t about 45% of the total. The majority of clients are Brazilian families, American families and institutional investors who have a historical relationship with Dynamo. “Some of our investors – for whom it will be a psychological change as the manager will not be a dynamo – will want to see what changes, but others already see the change as a natural progression of the business,” Cristiano said.
