Latin Finance - November/December 2009 - 55

private equity fundraising PE Readies Resurrection by Taina Rosa S ensing green shoots, many LatAm private equity (PE) managers expect fundraising to resume as risk aversion diminishes. Fund managers also expect limited partners (LPs) to start committing to new funds in the region by the end of the year, especially as economic forecasts brighten, though there is concern about lack of diversification in new entities. “It seems that there is more clarity as to where the economy is going,” says Advent International managing director Diego Serebrisky. “This could translate into more investment activity, but it will take time. Private equity shops require several months to make an acquisition,” adds Mexico-based Serebrisky. Advent has more than $6 billion in assets under management (AUM). According to the IMF, LatAm and the Caribbean started to recover during the second quarter of 2009 and should gather moderate speed, led by Brazil. However, the fund still expects regional GDP to contract by 2.5% in 2009 before rebounding by 2.9% in 2010. The region’s stock exchanges have also been performing well, with the best examples being the Lima Stock Exchange, up 121% for the year as of mid-October, and Brazil’s Bovespa, up 72% in the same period. In line with this recuperation of the economy, there are signs of improvement on the PE front. For the first half of 2009 PE investment amounted to $1.3 billion, down 24% from $1.7 billion in the first half of 2008, according to Thomson Reuters’ Venture Equity LatAm (VELA) mid-year report. Nevertheless, in terms of number of deals, activity is brisker, with 29 entries for the first half of 2009 and 26 acquisitions for the first half of the previous year. As the economic outlook for Latin America brightens, so do prospects for private equity fundraising and fund creation. Is an uptick really happening, or is it all just wishful thinking? Exits are also up in the first half of 2009, with a total of seven, compared to five in the first half of 2008, according to the VELA report. Financial services and alternative energy was the strongest draw for investors in the period, it adds. PE-related M&A activity in LatAm, both for acquisitions and exits, will rise in 2009 and 2010, says Shawn G. Hessing, Hopes for a rebound are partly rooted in the ascension of LatAm as an attractive place in which to invest. “The average USbased investor is less afraid of emerging markets than before,” says Julio Márquez, head of LatAm at New York-based GEM. “Ten years ago, these investors would not touch emerging markets, but now they are opening up to them. [After the financial crisis] there is a perception that investing in the US is not as safe as it used to be,” Márquez explains. The fund manager adds that political and economic stability in countries such as Brazil, Colombia and Peru is catching investor attention. GEM has $3.4 billion in AUM and in September announced the creation of a $250 million fund, known as Pine/GEM Brazil, to invest in Brazilian mid-market companies. “International investors are recovering from the crisis and are looking at LatAm for new allocations,” says Fernando Gentil, managing director at Darby Overseas’ Brazil office. He adds that LatAm, and Brazil in particular, is being considered in a more favorable light. Darby has more than $2 billion in AUM globally. In fact, UK-based PE shop Actis, which has $4.8 billion in assets under management globally, is in talks to close three deals in Brazil. This represents its first forays into the country and LatAm as a whole, says partner Patrick Ledoux, co-head of Actis’ São Paulo office. Limited partners are also keen on expanding their exposure to LatAm. Scott Voss, a partner at Boston-based Closing on Brazil: Actis’ Ledoux lead partner for KPMG’s PE group in the Americas. He adds that this is versus 2008, which was a very tough year globally. A KPMG survey of PE investors in the region earlier this year ranked Mexico, Brazil, Colombia and Peru as the top LatAm targets for investments over the next two years. November/December 2009 LatinFinance 55

Latin Finance - November/December 2009

Table of Contents for the Digital Edition of Latin Finance - November/December 2009