“The TOTVS we see today is the result of around 50 acquisitions”

You held leadership positions in large companies such as Eurofarma and Experian before taking on the role of M&A Director at TOTVS. How do you assess the space given to women in middle and senior management positions within organizations? 
I have seen progress in the inclusion of women in the workforce in recent years, and they are even becoming the majority in various sectors of the economy. However, unfortunately, the proportion of women in leadership positions remains low in most organizations. Women are still less frequently promoted to leadership roles than men, despite well-documented evidence demonstrating that greater diversity in middle and senior management levels enhances organizational performance. Unfortunately, many women still face challenges on the way toreaching senior leadership positions, including lower compensation, unconscious biases, a scarcity of female role models, and a diminishing number of female colleagues as they advance. In the context of M&A, for example, the picture is even worse and there is a long way to go in terms of female representation. In my 17-year career in the field, working in various countries around the world, I have seen few women leading M&A processes and departments – male participation has always been predominant. 

According to PwC, the software industry accounted for more than 70% of the technology deal volume in the first half of 2023, showing a 15% increase compared to the second half of 2022. How do you evaluate this trend? 
The volume of deals in the software industry is likely to continue this trend in both local and global M&A markets in the coming years. As demonstrated by the impact of Covid-19, companies are increasingly dependent on technology and are seeking innovation, digital transformation and business digitization. Despite some headwinds, especially macroeconomic factors, the technology M&A boom is expected to persist. Another key factor contributing to the attractiveness of investments and M&A in software, even in the current context of low growth, is the subscription and recurring revenue based business model, which provides greater certainty in terms of cash flow. 

What is different about M&A process involving technology companies compared to companies from other sectors? 
For technology companies, the process of analyzing and executing mergers and acquisitions, and their related risks, can be quite different from companies in other sectors. These differences occur during target analysis and pricing, the due diligence phase, when negotiating transaction documents, and also have a bearing on practical aspects before and after the deal is concluded. Valuation methods tend to focus more on the future potential of the target with pricing structures that incorporate significant earnouts. Unlike more traditional companies, technology companies tend to have less significant tangible assets; their value is often concentrated in intangible assets such as intellectual property and the data they possess. Moreover, as businesses, they are heavily reliant on the integrity of their IT infrastructure. 

With tech M&A, valuation methods tend to focus on the future potential of the target with pricing structures that incorporate significant earnouts.

TOTVS reported an adjusted net profit of R$116.7 million ($23.5 million) in the first quarter of 2023, representing a year-on-year increase of 12.7%. In the accumulated results for 2022, the growth was 36.4% compared to the previous year. How does the company’s M&A strategy fit into this performance? 
The TOTVS we see today is the result of around 50 acquisitions. M&A is a permanent theme and pillar that has always been and will continue to be part of the company’s growth strategy. It has been an important enabler in expanding and strengthening our core business (management software), as well as creating new business dimensions (such as business performance and techfin). This has allowed us to expand our addressable market beyond the management sphere, as the business performance and techfin markets are much larger than the management market. More importantly, M&A has contributed to making our product and service offerings better and more complete every day, to meet the needs of our more than 75,000 customers across Brazil and other countries. 

What can we expect from TOTVS in the near future?
TOTVS has a solid and consistent growth strategy, always associated with greater business efficiency, which is expertly implemented by a qualified and experienced executive team. This strategy is based on three main pillars: organic development, partnerships and M&A (with a strong current pipeline to pursue). We believe that our competitive advantages related to the business model, distribution platform, solution portfolio, inorganic strategy and ESG agenda will allow us to continue to make steady progress in the journey of building and developing our advanced 3D ecosystem (management, techfin and business Performance). We see ourselves ready and in a privileged position to seize current and future opportunities, whether organically, through strategic partnerships, and undoubtedly through M&A as well.