(LAVCA) September 14, 2011 – Fundraising for Latin America private equity and venture capital surged through June 2011, with 14 funds raising $4.9 bln, according to 2011 LAVCA Mid-year Data released today by the Latin America Venture Capital Association (LAVCA). The totals marked a 59 percent increase from the same period the previous year, putting 2011 on track to surpass the record-setting total of $8.1 bln from 2010 (2011 LAVCA Industry Data).
Capital committed is heavily weighted towards Brazil with 67 percent of the total raised for funds dedicated to that market. Two billion-dollar plus Brazilian funds closed in 1H2011: BTG Pactual ($1.6bln) and Vinci Partners ($1.4bln). Local investment firms Pátria and Gávea closed on an additional $3.2 bln in the third quarter.
“As developed markets continue to languish, we are seeing an increased appetite from global LPs to increase their exposure in Latin America, learn more about the region’s economies and fund managers,” said Cate Ambrose, President and Executive Director of LAVCA. “We expect this trend to continue.”
Results of LAVCA’s 2011 Limited Partners (LPs) Opinion Survey signal sustained interest in the region. Currently, 90 percent of the global investors who participated said they are either allocating to funds in Latin America or doing due diligence, up from 82 percent a year ago. Furthermore, 55 percent indicated that they expect to increase their allocations to fund managers investing in the region over the next 12 months, with 68 percent planning increases in the next 36 months.
Exits also surged in 1H 2011, surpassing all of 2010, with 33 PE-backed exits valued at $8.9bln. Strategic sales dominated the exit market, with Ashmore Energy International’s divestment of its Latin American portfolio accounting for over $4bln of the exit total. However, a number of exits were achieved through IPOs on both local bourses and international exchanges, including $1.25M raised by Arcos Dorados through a listing on the New York Stock Exchange in April.
With 65 investments realized in the first half of the year, deal closings were on par with 1H 2010. However the value of deals was down 30 percent from the same six-month period of the previous year ($2.7 bln in 1H2011 vs. $3.8 bln in 1H2010). A number of smaller deals were captured, with 63 percent of investments totaling less than $25M (compared to 45 percent in 1H2010). As expected, Brazil-based companies dominated, capturing 64 percent of the capital invested.
“As competition increases in the region and valuations rise in some markets such as Brazil and Colombia, we are seeing managers take more time to assess opportunities,” notes Ambrose. “However, we are very encouraged to see managers exploring other regional markets, sourcing deals in Argentina, Chile, and Mexico, as well as the rise in interest from US-based venture capital firms in regional start-ups.”
A number of Silicon Valley firms, including Accel Partners, General Catalyst, New Enterprise Associates and Redpoint Ventures, are now either actively investing in the region or traveling there to meet local players and understand the entrepreneurial communities.