By Guillermo Parra-Bernal
September 14, 2011 — Buyout firms investing in Latin America raised 59 percent more in funds in the first half of this year, mostly due to growing interest among the biggest global private equity firms, the Latin American Venture Capital Association on Wednesday.
Even as momentum built up in Mexico, Colombia, Peru, Chile and Argentina, where less competition for existing assets has brought the attention of dealmakers, Brazil lured two-thirds of total fund-raising through June, LAVCA, as the group is known, said in a statement.
Buyout firms raised $4.9 billion in the period, compared with $3.1 billion a year earlier. According to Cate Ambrose, president of New York-based LAVCA, the strong results for the first half put 2011 on track to surpass the record-setting total of $8.1 billion raised from investors last year.
“As developed markets continue to languish, we are seeing an increased appetite from global limited partners to increase their exposure in Latin America,” Ambrose was quoted in the statement as saying. “We expect this trend to continue.”
The numbers highlight the growing allure of Latin American countries as a destination for global capital, as a debt crisis and the effects of the financial crisis of late 2008 hindered some of the world’s most developed markets.
Torrid activity in local capital markets at the start of the year also allowed buyout firms to exit their investments, helping investors recycle fresh capital for new ventures, LAVCA said.
Exits, or the way private equity and venture capital firms offload some of their investments, amounted to $8.9 billion between January and June — surpassing all of 2010, LAVCA said. The group said that 33 private equity-backed exits took place in the period, led by initial public offerings in the region’s main stock exchanges.
A LAVCA poll found that 90 percent of the investors surveyed this year are either allocating to funds in Latin America or finalizing their investments, up from 82 percent a year ago.
Fifty-five percent of them signaled that more money could be allocated to Latin America-dedicated buyout funds over the next 12 months. More than two-thirds of the sample could ramp up their commitments to Latin America private equity investments over the next three years.
LAVCA also said that 65 investments were made in the first half of the year, in line with the same period of last year. However, the value of deals was down 30 percent to $2.7 billion from $3.8 billion a year earlier, reverting a trend that had begun late in 2009.
A number of smaller deals were captured, with 63 percent of investments totaling less than $25 million, compared with a ratio of 45 percent a year ago.
Capital committed remains heavily weighted toward Brazil, with Sao Paulo-based banking powerhouse BTG Pactual [BTG.UL] raising $1.6 billion and rival Vinci Partners, formed by former Pactual partners, getting $1.4 billion from investors.
Patria Investimentos, in which The Blackstone Group (BX.N: Quote, Profile, Research, Stock Buzz) bought a stake last year, and Gavea Investimentos, in which JPMorgan Chase & Co. (JPM.N: Quote, Profile, Research, Stock Buzz) also became a partner, closed on an additional $3.2 billion in the third quarter.
(Reporting by Guillermo Parra-Bernal, editing by Dave Zimmerman)