Caitlin Mitchell, LAVCA
Latin America Dedicated Private Equity & Venture Capital Firms Generate Strong Exits in 1H2016
LAVCA Data Indicates Growing Number of Mid-Market and Early Stage Investments
New York, August 30, 2016 – Private equity and venture capital-backed exits in Latin America had the strongest first half of the year since 1H2011, generating total proceeds of US$1.89b, according to data released today by the Latin American Private Equity & Venture Capital Association (LAVCA). Noteworthy exits include the sale of Dominican airport concessionaire Aerodom to Vinci Airports by Advent International; the sale of a 92% stake in Energuate, Guatemala’s largest electricity network, to IC Power by Actis; and Tribeca Asset Management’s sale of a 50% stake in City Parking, the largest parking operator in Colombia, to French multinational Indigo Infra S.A.
In the first semester of 2016, PE/VC firms active in Latin America executed 177 deals for a total of US$3.03b, a 39% increase in number of transactions and a 15% decrease in amount invested when compared to 1H2015. Just under half of all deals were middle market with ticket sizes between US$10m – US$100m. The number of middle market investments has steadily increased from 25 in 1H2014 and 30 in 1H2015 to 42 in 1H2016. The capital deployed by deals with ticket sizes of under US$10m increased from US$203m in 1H2015 to US$254m in 1H2016.
With US$863m invested through 84 transactions in 1H2016, Mexico reinforced its position as the second most important PE/VC market in Latin America in terms of capital invested and the most active PE/VC market in number of deal for the first time since LAVCA began collecting transactional data in 2008. Brazil has historically accounted for roughly two thirds of the region’s PE/VC investment totals, but in 1H2016, the country captured 58% of the total amount invested by PE/VC funds in Latin America (US$1.74b via 54 transactions).
“We project that Brazil may see increased investment activity in an environment of greater political certainty once President Dilma Rousseff’s impeachment process is complete,” said Cate Ambrose, President of LAVCA. “Confidence among local investors is improving in response to the level of accountability and transparency demonstrated in the judiciary’s handling of the Lava Jato corruption scandal and we see global institutional investors with a long-term perspective evaluating Brazilian deal opportunities – both the sovereign wealth fund of the government of Abu Dhabi and the Chinese conglomerate Fosun have been active.”
Over half of the capital deployed by PE/VC investors during the first six months of 2016 went to energy (28%), financial services (15%), and transportation (10%). As in previous years, and driven again by VC activity, information technology (IT) was the most dynamic sector during the first half of 2016, increasing the number of deals from 43 in 1H2014 and 62 in 1H2015 to 84 in 1H2016.
The number of VC transactions increased from 71 in 1H2015 to 104 in 1H2016. Capital deployed in venture deals totaled US$218m. Overall, there was a significant increase in seed and early stage rounds, particularly in Mexico and Brazil.
During the first semester of 2016, PE/VC firms with dedicated Latin American funds raised an aggregate US$1.05b via 19 fund closings, a sharp decrease from the US$4.27b that was raised through 23 fund closings a year ago for the same period. The cyclicality of the fundraising market, along with the large amount of dry powder available for the region, are key factors that may explain this trend. In the first half of 2016, Brazil-focused and pan-regional funds dominated the Latin American PE/VC fundraising landscape, representing 49% and 32% of the fundraising totals, respectively.
Additional findings include:
- Peru was the third largest PE/VC market by capital deployed, capturing US$269m through seven transactions.
- The year-on-year increase in Mexican deal totals was driven by venture activity, with 47 VC transactions as compared to 11 in 1H2015.
- In 1H2016, Colombia led the region in exits, with two divestments accounting for 29% of the total proceeds generated in Latin America.
- With seven transactions generating US$353m in proceeds, Brazil was the most active market for PE/VC exits in Latin America during the first half of the year.
LAVCA’s 2016 Mid-Year Data and Analysis will be available free to Members in early September and can be purchased by non-members on lavca.org. For more information about PE/VC in Latin America, register to attend the LAVCA Week events in New York (September 26-29, 2016).
About the Latin American Private Equity & Venture Capital Association (LAVCA)
The Latin American Private Equity & Venture Capital Association (LAVCA) is a not-for-profit membership organization dedicated to supporting the growth of private equity and venture capital in Latin America and the Caribbean. LAVCA’s membership is comprised of over 170 firms, from leading global investment firms active in the region to local fund managers from Mexico to Argentina. Member firms control assets in excess of US$60b, directed at capitalizing and growing Latin American businesses. LAVCA’s mission – to spur regional economic growth by advancing venture capital and private equity investment – is accomplished through programs of research, networking forums, education, and advocacy of sound public policy. More information at www.lavca.org
2016 LAVCA Industry Data Methodology
The 2016 LAVCA Mid-Year Data & Analysis provides insight into the fundraising, investment, and exit activity among private equity and venture capital funds investing in the Latin American region. LAVCA Industry Data is based on a confidential survey of fund managers and secondary sources, creating the first reliable source of data on private equity and venture capital in Latin America. LAVCA has conducted the Fund Manager Survey on PE/VC activity in Latin America since 2008. In this edition of the survey, LAVCA reached out to more than 250 fund management firms active in Latin America and the Caribbean. LAVCA collects most of the information directly from fund managers and amounts have been confirmed whenever possible through information provided by the fund managers themselves. Reported fundraising totals reflect only official closes (first, second, and/or final) confirmed by the fund managers or, if not obtained directly, reported in trusted public sources. Capital commitments accruing prior to or between official closes are not included. Captive funds or funds investing directly from its own internal sources (for instance, the balance sheet) are not included in this study. Infrastructure funds managed by private equity firms and making private equity-style investments are included in the analysis (e.g., equity investments in infrastructure-related industries).