This is a month of momentum for the LAVCA team – September kicked off with the announcement of mid-year fundraising and investment data, and the month closes out with hundreds of PE and VC investors converging in NY for LAVCA Week activities.
Momentum also describes the fundraising environment in 2014, at least for the large cap managers that have returned to the market for the first time since 2010-2011, when half a dozen firms drove record commitments to PE in the region.
While fundraising for the first half of 2014 totaled US$3.5b, large cap funds from firms including Advent and Gávea will likely drive year end totals over the US$8b mark, on par with 2010. In a parallel trend, LAVCA noted fundraising momentum among mid-cap managers as part of our membership renewal cycle in August, when 14 member firms reported an increase in AUM from the previous year.
The results of our third annual LP Survey in partnership with Coller Capital also pointed to continued demand among international institutional investors for exposure to the right managers, strategies, and markets in Latin America (full results available on Tuesday, September 30th).
An increasing number of global LPs are looking at venture capital managers active in Latin America for the first time, including some US fund of funds and that were first movers in this space. Notably, regional VC player KaszeK Ventures, which raised its first fund in 2012, closed on US$135m for a second Latin American-focused venture fund in January.
On the deal side, global GPs demonstrated that the region remains a priority, with both Bain and KKR closing their first direct deals in Brazil in the first half of 2014, Carlyle closing its first deal in Peru, and General Atlantic securing a first investment in Mexico.
Overall, there were 93 PE/VC investments in the region for a total of US$2.57b, which reflects a 10% decrease from the same period in 2013 – investments reached a six-year high in 2013, so it appears that in 2014 managers are focusing their attention on managing portfolio companies and raising funds.
Another noteworthy trend was the number of global, and particularly European, deals with a major Latin American component (although these transactions are not reflected in LAVCA data).
UK private equity group Cinven bought Spanish headquartered Gas Natural Fenosa Telecomunicaciones (GNFT), a fiber-optic network operator in Spain and Latin America, and KKR’s pharmacy chain Alliance Boots expanded to the region through an acquisition of two major retail pharmacy networks in Latin America. Other examples included global transactions from Warburg Pincus and Temasek in financial services and telecommunications.
Europeans were also strategic acquirers of PE-backed companies in Brazil, with Advent International and Alothon Group selling industrial laundry company Atmosfera to Elis, the European leader in linen rental and laundry services, and GP Investimentos selling cargo tracking services provider Sascar Participações to Compagnie Financiere du Groupe Michelin. UK publishing and education company Pearson also acquired a minority stake in Grupo Multi, a Brazil-based English-language training company, from Kinea Investimentos.
Opportunities in information technology continue to attract new investors, with tech sector deals capturing almost a third of total dollars invested in 1h2014. That total includes some large cap deals like the one done by KKR in Brazil, but also reflects an increase in the number of later rounds for VC-backed companies, involving growth and private equity investors, particularly in Brazilian ecommerce.
Healthcare related deals were popular in 2014, particularly in Mexico where EMX, Northgate, and General Atlantic were active, and in Colombia where Advent and Ashmore closed transactions.
Finally, in terms of generating liquidity for investors, proceeds from PE/VC exits increased by 7% year-on-year in the first half of 2014, with 12 divestments valued at US$1.6b and an additional four sales where financials were not reported. More than half of the total divestment proceeds were captured by Brazil, with over US$1b generated through eight transactions, a 9% increase compared to the same period last year.
Following 2013, when the region was host to eight PE-backed IPOs across Brazil, Mexico, and Chile, there were no new listings on public markets in the first half of 2014. But in the second semester Riverwood succeeded in listing Globant, a technology services provider headquartered in Buenos Aires, on the NYSE, and Mexico’s Nexxus Capital listed Grupo Hotelero Santa Fe on the Mexican exchange in September.