IPO costs in Brazil

An analysis of the offerings between 2005 and 2017

A big step for growth

Companies have various sources of financing available to them. To choose the most appropriate, it is necessary to evaluate the organization's profile, its strategy and the implications that the chosen source will bring. Going public is one of the ways, as it allows the company to rely on the capital market to grow.

Access to the capital market involves a major cultural change. The admittance to the stock exchange means for many executives that the company has achieved a special kind of success.

In this context, Deloitte has prepared this study with the aim to bring useful information to participants in the Brazilian capital market, and also to potentially interested in the journey, based on public information from 198 companies that carried out their IPOs and subsequent offerings between January 2005 and April 2017. Although this material is not a scientific study, the information compiled here can help company managers in the task of planning the future of their organizations.

Number of offerings

Entre 2005 e 2017, foram realizadas 149 IPOs e 110 follow‑ons. Em apenas dois anos (2006 e 2007) foram realizados quase 63% das aberturas de capital do período.

*Does not include offerings with proceeds above R$10 billion. Does not consider offerings under ICVM 476.

After a preparation period, the company goes from a privately held company with one or a few partners to a company with a greater number of shareholders, who can buy and sell their shares on a stock exchange. Publicly traded companies must comply with deadlines and regulations, and have a strong corporate governance structure. On the other hand, they have access to all funding mechanisms offered by the capital market.

To enjoy the benefits of this modality, the partners should consider the obligations arising from the status of publicly traded company against the expected benefits.

A company goes public when it sells its shares to the public for the first time and starts to have its shares traded on the stock exchange. This process is known as Initial Public Offering (or IPO).

The transition from a private held company to a publicly traded company, if well planned, is a simple process. Organizations that have IPO in their strategy must be prepared in advance and carefully assess the challenges, opportunities and risks involved in this process, relying in many cases on the help of consultants from various sectors.

By becoming a publicly traded company with shares traded on the stock exchange, the company diversifies the funding alternatives, provides asset liquidity to its shareholders and strengthens the institutional image and management professionalization.

Briefly described, these objectives are actually linked to the assessment of important aspects, including: investment plans, reduce dependence on bank financing and, therefore, reduce financial leverage, adjustment of the organizational structure, increase the shares liquidity and the internal culture in relation to coexistence with a much larger group of shareholders and accountability to the new investor partners.

There are, thus, a number of factors to be considered for the IPO decision. In this context, one factor that is repeatedly questioned in making this decision is the so-called costs related to IPO and the maintenance of the status of publicly traded company, and the assessment of the costs for subsequent offerings (follow-ons).

In 2006, B3 (then BM&FBOVESPA) conducted a study of the costs of an IPO in Brazil, where it was possible to note that these amounts had a very significant variable component, which is the structuring, coordination and shares distribution commission. The costs of maintenance of status of publicly traded company incurred by companies listed on the Stock Exchange varied greatly due to the complexity of each company, as well as due to the practices adopted by each company in relation to its relationship with the market.

The pre-IPO planning should not only focus on the event of issuance of shares and funding, but should pay attention also to structuring the skills that will support the development and sustainable growth as a publicly traded company. Only with these skills the company will be prepared to operate at expected levels.

Since then, there have been major movements in the Brazilian capital market. If, in 2007, the country's capital market experienced an exuberant moment, in which 64 companies carried out their IPOs, the adverse international scenario and the economic and political instability in Brazil directly hit the Brazilian business environment after 2008, reducing international financial flows and reversing the growth trend expected for the world's economic activity. This means that the capital market is cyclical, which emphasizes the importance of the company being ready for any opportunities that may arise.

Preparation for the IPO

The costs relating to the preparation for the IPO depend essentially on the structure that the company already has. Considering that going public assumes, for example, that the company is audited by an external auditing firm and that it has an appropriate level of transparency, internal controls and corporate governance, it is possible to say that companies that have invested in a long-term preparation will be less impacted by these costs.

According to the literature already available on the subject, these costs are divided into direct and indirect components. Direct components include all expenses related to the listing decision – including the costs with coordinators, lawyers and auditors.

Other components of direct costs are the fees paid to the stock exchange, legal advertising and the press and the costs to comply with the disclosure and corporate governance rules.

The indirect component is the result of an international discussion that defends that the discount causes an impact on the company's economic valuation, that is the difference between the bid price registered in the prospectus and the closing price on the first trading day on the stock market.

Despite this argument, there is no practical example of this indirect discount in offerings held in Brazil. The purpose of this study is not to address or attempt to measure this impact, but it is a subject that should be evaluated by companies that intends to go public.

Thus, it is difficult to measure the costs involved in this process. Some entrepreneurs understand that constantly improving its structure, always seeking the best practices, is something natural and intrinsic to its growth process. In these cases, hiring an auditing firm does not represent, for these leaders, a cost connected to the IPO. Against the grain, companies that do not see value in the improvement of its management and governance before the decision to go public will have a larger and more costly homework to do.

Offering proceeds Direct costs costs Indirect and professional fees Regulation, governance Annual fees costs Transaction Offering cost Direct costs costs Indirect commissions Coordinators fee Professional fees Listing costs Other Discount

Relationship between offering costs and offering proceeds

Between 2005 and 2017, total median costs for an IPO was 4.8%, while for the issuance of a follow -on the median recorded was 3.1%. IPO demands higher costs due to the steps a company must take to become a publicly traded company. Among the most significant costs, for both IPO and follow -on, are the commissions.

Note: for all data in this section, “commissions” represent costs with coordinators and “expenses” represent costs with lawyers’ fees, auditors’ fees and other direct costs of the offering.

The company should assess its governance level when deciding to carry out the IPO with offering release. For each governance level there is a specific rule that provides different benefits and costs for the company.

Listing with no public offering

Companies interested in accessing the market gradually can be listed on the stock exchange without conducting a public offering. Thus, they separate the process of listing and offering. To this end, it is necessary the registration as a publicly traded company with CVM and adherence to one of the Access Market's listing segments (Bovespa Mais or Bovespa Mais Level 2).

In this mode, the costs are at most linked to the legal procedures of the process. Considering that a listing with no public offering requires registration as a publicly traded company with CVM, the company will have to prepare the necessary documents for obtaining this registration, in addition to the documents that will be filed with the Stock Exchange. It is important to have a legal counselor that supports the company in the preparation and review of these documents.

Moreover, most companies do not have a website or an area on their website for investor relations. As a publicly traded company and listed on the stock exchange, even if there is no public offering, companies must provide this communication channel and repository of strategic information to investors.

Listing with public offering

The costs related to the offering itself include all expenses related to the decision to distribute shares publicly. Among them, expenses on coordinators, lawyers and auditors. If the company already has its financial statements audited, costs refer to assistance in obtaining the registration as a publicly traded company, the possible need to update the financial statements and issuance of comfort letters to the offering's coordinators. Other components of the IPO costs are the fees paid to B3, CVM, legal advertising and the press, in addition to costs to comply with the disclosure and corporate governance rules.

There are two ways to perform public offerings:

  • With restricted efforts, in accordance with CVM Instruction 476
  • • With extensive efforts, in accordance with CVM Instruction 400

The public proceeds of shares can follow the rules of CVM Instruction 476 or CVM Instruction 400, as appropriate. CVM Instruction 476 brought agility to the public offering process. An important difference between such regulations is the extent of the sales effort. CVM Instruction 400 allows the shares to be offered to all investor profiles. CVM Instruction 476, on the other hand, restricts it to professional investors. This distinction is due to the level of information available for the proceeds.

Another distinction among these instructions is the offering’s registration. As CVM Instruction 400 covers all types of investors, there is a need to register the offering with CVM, which does not occur in offerings under CVM Instruction 476, which are conducted with restricted efforts and, therefore, there is an exemption from the offering's registration.

Expenses on coordinators

In the IPO process, entrepreneurs or founders hope to conduct a successful operation, with a proper pricing, and stability in the share price after the IPO.

In the pursuit for this objective, the choice of a competent coordinator who is historically an investment bank can help ensure the success of the offering.

Every IPO shall be conducted by a financial institution authorized to operate in the securities proceeds system (coordinator or underwriter). This intermediary is responsible, among other items, for modeling the operation (assessment of the proceeds's feasibility), for forming the proceeds consortium, for conducting the due diligence on the company's information that will be used in the preparation of the issuance documents, for coordinating the procedures with CV, for structuring and determining the appropriate period (timing) for the offering, for the bookbuilding process, for organizing the presentations to the market (road show), and for designing the proceeds plan.

The coordinators are familiar with market conditions, know the level of interest from institutional and individual investors with respect to new issuances of shares and compare the multiples of shares of similar companies that held an offering or have their shares traded on the stock exchange.

The expenses on coordinators are usually the highest individual costs of the IPO, and are negotiated directly between the company and the leading coordinator. In addition to the services already rendered, these expenses are intended to compensate the coordinators for the cost of participating in the offering.

In IPOs and follow-ons carried out in Brazil, the expenses on coordinators are usually the following: - Placement commission; - Coordination commission; - Firm commitment commission; - Incentive.

The factors that affect the amount of commissions paid to coordinators vary due to market conditions, the size and complexity of the operation and the placement scheme (with firm guarantee or best efforts), among others.

How to choose a coordinator

The choice of a coordinator shall take into consideration several aspects. Below are some items that companies must evaluate to choose the investment bank that will coordinate their offering:


In an offering, the coordinators’ reputation is of great importance. Institutional investors and individuals will have more confidence in their shares when identifying the name of a highly-reputed investment bank in the offering processes. The reputation also influences the capacity of the leading coordinator in organizing a strong consortium with other coordinators to assist in the sale and distribution of the shares.

Distribution capacity

It is important for companies and for the markets that the coordinators distribute the shares in a varied investors base to generate permanent market interest in the shares after the offering. Each investment bank has a different customer base. It is important for companies to understand each banks’ composition and perform an evaluation taking into consideration their strategy. Some investment banks have access to many institutional investors, while others are focused on individual investors. It is important to mention that an offering is only effective through coordinators who have a good customer base, as well as ability to structure a strong consortium. It is also highlighted that, of the 148 IPOs that occurred between January 2005 and April 2017, approximately 51% of the total volume offered was absorbed by foreign investors. For more than two decades, foreign investors are quite important in the Brazilian capital market and on B3.


An investment bank should have experience in the proceeds of shares of companies in the same sector or similar sectors. This affects the ability to set the price of the shares and give more credibility to explain and offer the company to potential investors.

Ability to make the market

Although not a requirement for the IPO, coordinators or other market intermediaries can become market makers for their company's shares, that is, they assume the obligation to place in the market, daily, firm purchase and sale offers for a predetermined, and known by all, number of assets. When recording offerings, the market maker provides a reference price for the asset trading.

The leading coordinator can act as market maker, or the role of market maker can be played by brokers, securities dealers, investment banks or multiple banks with investment portfolio.

Financial analysts

The financial community usually sees the leading coordinator as the main source of information about the company. Therefore, it is important that the chosen investment bank has experienced analysts, respected by the financial community and who closely monitor the industry in which the company operates, not only during the IPO process, but also before and after the IPO. The publicly traded company has an important role in the relationship with the community of analysts, by fostering their interest in their role's coverage.

Lawyers’ fees

Lawyers’ fees are basically related to the preparation of the application for registration as a publicly traded company, the offering documents, negotiation of the coordination and proceeds contracts, corporate matters and other issues that arise in the course of the registration and offering process.

As the application for registration is a legal document, the lawyers usually are responsible for assisting the management in its preparation. When the lawyers have doubts and need information, they turn to the company's management. Based on the information collected, the role of legal counselors will be to help the company decide what information should be included in the application (that is, which facts are important) and how they should be included. Moreover, the legal counselors will file the application with regulatory agencies, coordinate and assist in the preparation, and present the answers to the comments from these agencies.

It is also the legal counselors’ role to assist the company in corporate matters before the offering, as well as in the preparations along the process. The lawyers have a key role in helping the company to coordinate the due diligence process, negotiating the contract of coordination and proceeds on its behalf, issue an opinion on the validity of the shares to be offered, and advise the company on matters related to the capital market.

If the work arising from corporate matters are extensive, requiring a complex reorganization or the negotiation of relevant contracts, the lawyers’ fees can be significantly higher. The fees also increase if there is a large number of selling shareholders due to the legal and administrative work related to each seller.

In secondary or mixed offerings, some of the expenses on lawyers’ or other fees may be paid by the selling shareholders. The shareholders and the company will decide on the expense allocation. However, the company usually bears most of the expenses.

Auditors’ fees

These fees refer basically to the participation of independent auditors in assisting to obtaining the registration as a publicly traded company and in the issuance of comfort letters to coordinators. In some cases, it may also be related to specific work on other financial information, including pro forma information.

The expenses are proportionately higher when there is a need for separate audits of the financial statements of the companies acquired or to be acquired, investees or accounted for under the equity method and financial guarantors.

If interim financial statements are required, the auditors’ fees will also be higher, since they will have to review them, especially regarding comfort letters requested by the coordinators.

Audited financial statements are part of the offering documentation and are supported by the independent auditors' report – which generally give consent for the inclusion of this report in the documentation. Before such consent is obtained, the auditors perform procedures until the documents’ filing dates, including an analysis of subsequent events to determine whether the financial statements and their report are still appropriate.

This analysis includes evaluations of events that occurred or became known after the issuance of the latest independent auditors’ report and that, if they had been known at that time, would have been disclosed or reflected in the financial statements.

The auditors review and discuss with management any concerns about the interim financial statements, and read the entire prospectus to check for inconsistencies between financial and non-financial components and about relevant matters that have not been disclosed.

During the offering process, coordinators and their lawyers meet with the company and its independent auditors to discuss the financial statements and reach a consensus regarding the comfort letters to be issued by the independent auditors.

When requesting comfort letters, coordinators are seeking assistance to conduct a due diligence on the financial and accounting data contained in the offering documentation that are not presented in the independent auditors’ report. The comfort letters describe very specific procedures carried out at the coordinators’ request.

Independent auditors usually provide a preliminary draft to the coordinators well before the first delivery date, so that coordinators can decide if the procedures described in the comfort letter meet their needs.

The procedures performed by independent auditors typically include: - Verify the financial data contained in the offering documentation against accounting records or financial statements; - Evaluation of the financial results available after the last audit to determine if there was a decrease in revenue or equity or other trends that are not properly disclosed in the offering documentation.

Other direct costs

Other expenses with individual amounts relatively lower (mandatory or not) should also be considered in the costs for the IPO process, such as: - CVM and B3 fees; - Costs related to the bookkeeping agent; - Any costs associated with custodians and settlement chambers; - Costs related to the printing of all the materials; - Travel costs and expenses on investor presentations (road shows); - Expenses on legal advertising

In addition to these identifiable costs, there will also be the time spent by executives and management who will assist coordinators, auditors and lawyers in the offering preparation.

Costs per proceeds range

Costs per proceeds range decreased due to the increase in the proceeds amount. The commission that stands out the most is the placement one.


Each sector has a different characteristic and series. These differences should be taken into account when estimating the IPO costs.

Costs associated with being a publicly traded company

Although they are not object of this study, costs associated with the compliance with all requirements from the regulatory agencies for publicly traded companies must also be taken into consideration by the companies that are deciding on an IPO process.

It is noteworthy that some of these costs are also incurred by publicly held companies that have good governance structure and practice transparency in their information.

It is very important for companies to aim to constantly improve their management practices and internal controls, regardless of whether they plan to go public or not. Well prepared companies have more satisfactory performance, survive more easily to macroeconomic crises and are best priced in any transaction, either a merger, acquisition or partial or total sale to a financial or strategic partner.

There are entrepreneurs who still associate management, transparency and corporate governance costs to the IPO, although currently these issues are no longer seen as a competitive edge but a condition to compete.

Some examples of costs for the maintenance of registration as a publicly traded company with shares traded on the stock exchange are: - Governance structure (boards, investor relations, risk management, etc.); - Independent audit (on quarterly and annual financial statements); - Statements under international standards (convergence to IFRS); - Publication of financial statements (quarterly and annual); - Publication of call notices for annual and extraordinary general meetings and minutes of the meetings and disclosure of relevant facts, etc.; - Inspection fee owed to CVM; - Annual fee paid to B3.

CAs mentioned above, some listed company’s maintenance costs are related to fees charged by CVM and by B3, which are disclosed by the two institutions on their websites.

It is worth noting that companies interested in listing on the stock exchange's Access Market have incentives in the fees charged by B3. Such incentives are due to the Stock Exchange's interest in developing this market in Brazil.

The company planning to go public needs to consider the increase in costs and the intangible bonus brought by the status as publicly traded company.

Publicly traded companies are better priced and have more credibility with their customers, suppliers, employees and stakeholders.

Moreover, with the IPO, the market has a better understanding of the company, for the following reasons: - More formal and rigorous accounting practices, inspected by CVM and B3; - Better financial controls, compliance, governance and risk management systems; - Additional demands for information and transparency in the financial performance reports, compensation, risk and performance indicators; - New regulatory and tax environments; - Creation of communication channels with shareholders and market analysts (through a dedicated and investor relations teams).

CVM, stock exchange and investors demand from publicly traded companies a lot of financial and operational information. To meet these needs, the company must assess its capacity to prepare financial statements and other periodic reports in accordance with CVM requirements.

For example, the financial statements must be prepared in accordance with accounting practices adopted in Brazil and with IFRS, which include specific disclosures for companies registered with the CVM as, for example, more details on financial instruments and compliance with other regulations.

Most executives agree that the financial reporting requirements for a publicly traded company are more formal and rigorous than for privately held companies. Although the actual expenses for maintenance of the status as a publicly traded company depend on each organization's current stage of development as well as each management's actual commitment to achieve the "state of art" in serving the market, it is important to highlight that this area generally requires special attention from the whole company and that all these activities take time and resources from the organizations.

Activities for the preparation of financial reports

Among the main activities needed for the preparation and disclosure of financial reports, the following are highlighted: - Assess the availability and quality of financial data in light of the accounting practices adopted in Brazil, IFRS and CVM requirements; - Identify new data needed, as well as its source and process development costs to obtain such information; - Develop support processes and resources for the preparation of financial statements and other reports (IFRSs, Reference Form, etc.); - Consider the competences of the investor relations team and how to solve problems, such as personnel reduction or need to hire personnel; - Integrate financial reporting with governance and risk management to generate information that, in addition to meeting the financial statement requirements, guide the management and the improvement in performance indicators.

CVM and B3 fees for listed companies

Listing Analysis fee for listing of shares R$ 60,443.00 Analysis fee for offering of shares R$ 59,257.00 + Share proceeds fee Offering volume × 0,035% + Registration fee for offering of shares Offered volume × 0.3% Voting service remotely free in 2017 Shares’ annual fee R$ 38,094.00 + (CS × 0,005%) + Corporate event fee + Inspection fee (quarterly) Analysis fee for Foreseen financial Volume × 0.004% + Proceeds fee Offering volume × 0.1% for debentures Offering volume × 0,035% + Registration fee for offering of debentures Offered volume × 0.3% OPA analysis fee offering of debentures R$ 237,031.00 + OPA execution fee IPO Assemblies Follow-on Offerings of Debentures Delisting

Study methodology

This study was prepared based on public data available in the final prospectuses of public offering conducted in Brazil, from January 2005 to April 2017, being initial (IPOs) or subsequent (follow-ons) offerings. These prospectuses are available on the website of each of the companies, as well as on the websites of the Brazilian Securities and Exchange Commission (CVM) (www.cvm.gov.br) and B3 (www.b3.com.br).

The survey's data was composed initially by 251 offerings carried out according to the CVM Normative Instruction 400, but, due to the characteristics and high proceeds, some proceeds that occurred between 2005 and 2017, with distributed amounts above R$10 billion, were excluded from the data in order to maintain the homogeneity of the analyzed sample.

It is important to highlight that, for all offerings with data available, only the costs and expenses of the offerings in Brazil were used in this study, with the goal of obtaining a more accurate representation of the local market. In some cases, the offering relied on efforts to sell the shares to qualified foreign investors, whose prospectuses not always have the breakdown of expenses incurred for international placement efforts; in these cases, the survey considered the total expenses, as well as the total amount distributed in the analysis. Therefore, this limitation should be taken into account in the results.

The sample analyzed did not consider the resources obtained through any supplementary lots issued after the settlement of the base offering, once final prospectuses are not updated to include this data. However, as the decisions for the offering placements are made by administrators based on the initial lots (including issuance costs) that are disclosed in the final prospectuses, the analyses in this study contain information that can assist in evaluating an IPO.

Since September 2014, from amendments made to CVM Instruction 476 through CVM Instruction 551, it became possible to conduct a public offering of shares distributed with restricted efforts, intended solely to professional investors and intermediated by members of the securities proceeds system. Because they are exempted from proceeds registration with CVM, data on commissions, expenses and total costs are not available in the prospectuses and, consequently, were not considered for this study. Therefore, this limitation should be taken into account in the results.

R$ 1.253.943 Total Costs 0,68% R$ 375.662 Expenses 0,20% R$ 878.278 Commissions 0,47% R$ 185.069.926 Distribution 1 IPO 5 Follow-ons 6 companies Out of the sample (*) amounts in millions of R$

Ready to the next step

With the analysis of Brazilian offerings conducted between 2005 and 2017, it is possible to observe that the costs of coordinators’ commissions are the most significant to be considered when deciding to hold an IPO, representing 3.6% of the total distributed in the median of the period's analyzed offerings. Other expenses are less significant and represent 1.2% of this total.

While commissions present variable costs, other expenses present fixed costs, being consistently reduced by the increase in the volume of proceedss.

The analyses also demonstrated that the costs and expenses can be significantly changed depending on factors such as proceeds size, its complexity, industry in which the company is located, or yet by the fact of already being a publicly traded company.

Knowing all these costs, company owners and management can evaluate the best options for IPO, in addition to having control of all the investment required to conduct a successful IPO.

About Deloitte

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About B3

B3 is a world-class financial market infrastructure provider and one of the largest in terms of market value, among the global leaders of the stock exchange industry. Result of the combination of activities of BM & FBOVESPA and Cetip, it creates and manages - on stock exchange and over-the-counter market – trading, clearing, settlement and registration systems for all major classes of assets, from shares and private fixed-income securities to currency, interest rate and commodity derivatives, as well as structured transactions and registration of liens and encumbrances. B3 also offers central securities depository services and risk control systems up to the final beneficiary and acts as a central counterparty for transactions carried out in its markets. It is the leading company in the provision of electronic information delivery services necessary for the registration of contracts and encumbrances by transit agencies.

With headquarters in São Paulo and offices in New York, London and Shanghai, B3 brings together a long tradition of innovation in products and technologies, and performs important functions in financial and capital markets in the region by promoting best practices in corporate governance, risk management and sustainability. Working through its qualified network of intermediaries, it manages secure and resilient environments, increasing the safety, soundness and efficiency of the Brazilian market and contributing to the long-term capital formation and the economic growth in the region.


Jon Marcus

Deloitte Global Capital Markets Group Leaderjonmarcus@deloitte.com

Carlos Zanotta

Deloitte Global Capital Markets Group Partner brauditoria@deloitte.com

Project leadership

Deloitte's Global Capital Markets Group

Editorial coordination

Deloitte's Brand & Communication Department

The content of this guide is of full and exclusive responsibility of Deloitte and does not necessarily reflect the position or views of B3 on the subjects discussed.

This publication does not aim to discuss in full all issues related to IPO and should not be used as a basis for decision making.