Fundraising by private-equity and venture capital firms in Brazil is expected to rise this year, a senior industry executive said, which could help propel new acquisitions in the infrastructure, logistics and information technology sectors.
Private-equity and venture capital firms secured $2.34 billion in funding for Brazil investments last year, down 35 percent compared with 2012, the Latin American Private Equity and Venture Capital Association said late on Monday. The amount represented 43 percent of the $5.5 billion raised across Latin America, said the New York-based group, known as Lavca.
Lavca President Cate Ambrose said in an interview late on Monday that slower growth and eroding confidence in Brazil, coupled with a weaker currency, helped push down asset valuations and made potential takeover targets attractive. The largest Brazilian and pan-regional private-equity firms did not undertake major fundraising efforts last year, partly explaining the large annual drop in 2013.
“Fundraising will gain momentum this year,” Ambrose said on the sidelines of an industry event in Rio de Janeiro. “This shows that the industry is deepening. It’s a good sign for activity.”
Getting new money from investors could turbo charge the buyout industry’s ability to step up acquisitions. Private-equity buyouts neared $6.1 billion in Brazil last year. Grupo BTG Pactual SA, Patria Investimentos Ltda and Gávea Investimentos Ltda are among the firms considering raising money for new funds this year, industry sources told Reuters.
BTG Pactual, Latin America’s largest independent investment bank, could raise around $1.5 billion for its third buyout fund, Marcelo Hallack, a senior executive at the firm’s merchant bank, told attendants of the same event. One source told Reuters that BTG Pactual is seeking investors to commit money for the new fund for as many as 10 years.
Fundraising among private-equity firms has slipped every year since 2011, when a record $10.3 billion was raised, allowing most buyout firms to refocus on investing. A recovery in fundraising this year indicates that risk-taking is on the rise again and that buyout activity in the region, especially in Brazil, is maturing.
Ambrose’s remarks echo those of David Rubenstein, co-chief executive officer of Carlyle Group LP, who said at the conference that Brazil and China will surpass the United States as the world’s largest recipients of investor money for private-equity investments by the end of the decade.
Demand for emerging markets investment will grow, despite facing more competition from a recovering U.S. economy, as a favorable labor market, rising demand for services in the wake of household income gains and a need for better infrastructure offer investors a healthy balance between risk and return.
The current level of exits, which has remained stable in the past two years, is not worrisome, Ambrose said, referring to the process by which private-equity funds cash out some of their investments. Exits usually take place in the form of a sale to a strategic investor or a stock offering in a financial bourse.
Ambrose said that buyout firms need to accelerate divestments in Colombia. A vast reform package undertaken by the Mexican government, while making the regulatory framework a little shaky, is boosting the allure of private-equity activity there, she noted.
“The industry in Mexico is maturing. The outlook is definitely promising,” Ambrose added.
(Reporting by Guillermo Parra-Bernal; Additional reporting by Luciana Bruno in Rio de Janeiro; Editing by Sofina Mirza-Reid)DON'T MISS IT! Now in its 10th year, PartnerConnect Midwest is bringing you 300 attendees, over 400 private ExecConnect meetings between LPs and GPs, and three insightful tracks including Buyouts Funds, Buyouts Deals and Co-Investments. REGISTER TODAY!