Latin Finance - July/August 2009 - 22

private equity Eye on the Prize by Taina Rosa T he global economic slump does not deter forward-looking LatAmfocused private equity funds. They continue to enter and exit investments, start up new vehicles and raise fresh cash. “Different from previous downturns, fundamentals [of potential targets] are pretty much intact and business goes on,” says Julio Lastres, senior managing director at Darby Overseas, which has more than $2 billion in assets under management (AUM) and invests in Asia, Europe and Latin America. “We’re seeing good opportunities and we are talking to a number of strategic investors looking to buy assets.” That is not to say LatAm PE activity has not been impacted. Liquidity has clearly dried up, both on the credit and equity sides. “Obviously, with international investors putting on the brakes globally, that has made many local investors put on the brakes as well, thus shrinking liquidity,” adds Lastres, who is in charge of the Darby EM fund and the Darby Latin American PE fund. It is far from smooth sailing for private equity cash raising. But funds are not pulling out of LatAm, which is more attractive than other regions. Association (Lavca), says while 2009 fundraising will be less than 2008, it will still exceed 1998-2004, which saw the tech bubble burst, currency devaluation and crisis across the region. LAEF raised a total of $130 million between 2005 and 2008 for its hydrocarbon and forestry funds, he adds. Meanwhile, Russell Deakin, partner at Brazil’s CRP, says his shop is shooting to raise $100 million for its seventh fund’s first close. He says it already has $87 million in commitments “from four or five Brazilian pension funds and BNDES.” The latest Lavca survey shows that more than 80% of investors intend to maintain or increase allocations to LatAm over the next 12 months. This survey was conducted between November 2008 and March 2009 and polled 110 fund managers active in the region. An Emerging Markets Private Equity Association (Empea)/ Coller Capital EM PE survey shows that in 2009, about 48% of limited partners surveyed include LatAm and the Caribbean in their strategies. In the 2008 survey, 40% included the region in their strategy, up from 31% in 2007. Over the next two years, the survey shows, some 12% of investors plan to increase their investments in LatAm excluding Brazil, and 8% plan to begin investing there. As for Brazil, 17% of LPs surveyed plan to increase investments there and 11% plan to start. According to Claudia Arango, senior vice president of AIG Capital Partners, which has about $35 billion in assets under management (AUM), LatAm corporate valuations average 4.0x Ebitda. By contrast, she says, entities in emerging Asia average 7.5x Ebitda, while Eastern European companies are at 6.8x. Patricia Dinneen, managing director at Siguler Guff, says LatAm valuations are much more reasonable than those of India, where “20x cashflow is being paid.” Managers with fundraising to do are not giving up, especially as the crisis unveils some increasingly attractive investment opportunities. Valuations of LatAm companies are more attractive than in other emerging markets, say private equity investors. Strategic buyers on the prowl, says Lastres New York-based Siguler Guff has about $8 billion in AUM. But despite more enticing levels, Arango is looking for more. “Valuations haven’t decreased as much as we wanted,” she says. Fundraising Slump Fundraising for BRIC markets is down 40%-50% compared to the first quarter of last year in dollar terms, Dinneen tells LatinFinance. She adds that Brazil is seeing the smallest reduction in volume. Eduardo Elejalde, president of Colombia-based Latin American Enterprise Funds (LAEF) and chairman of the Latin American Venture Capital 22 LatinFinance July/August 2009
Latin Finance - July/August 2009

Table of Contents for the Digital Edition of Latin Finance - July/August 2009
