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Back to School: LatAm exits up, fundraising off, deals await

  • LatAm fundraising drops sharply in first half
  • Exit activity picks up
  • Deal pipeline robust with opportunities

First-half fundraising dropped sharply at funds dedicated to Latin America, a region awash in capital that was raised in the past few years and remains unspent, the Latin American Private Equity & Venture Capital Association said.

And the group says investors should be on the prowl for deals right now. “This is the right time to buy,” the group’s president, Cate Ambrose, said. “There’s a pipeline of deal opportunities more attractive today than they were at the peak of the market in 2011.”

On the fundraising side, both the number of closings and the fresh cash raised were down. Firms with Latin American venture and private equity funds raised $1.05 billion, dropping 75 percent from $4.27 billion in the year-earlier period, the group said in its half-year report. The number of fund closings fell to 19 from 23.

The drop in fundraising is unsurprising considering the recent environment, especially in the region’s largest economy, Brazil, which fell into recession last year and has been rocked by political turmoil. The Brazilian real fell against the dollar, though it has partly recovered.

“It will be a fairly meager year for fundraising” in the region, Ambrose said.

The better news is that exit activity across the region picked up in the first half. PE and venture-backed exits had the strongest first half since 2011, generating a total of $1.89 billion, LAVCA said.

Big exits included Advent’s sale of Dominican airport concessionaire Aerodom to Vinci Airports; Actis’s sale of a 92 percent stake in Energuate, Guatemala’s largest electricity network , to IC Power; and Tribeca Asset Management’s sale of a 50 percent stake in City Parking, the largest parking operator in Colombia, to Indigo Infra, according to LAVCA.

Investment activity was also robust in the first half, LAVCA says. PE and venture firms invested a bit more than $3 billion across 177 deals – a 39 percent increase in the number of deals but a 15 percent decrease in the amount invested.

Interestingly, middle-market deals dominated investment activity at 42 transactions, with just under half of first-half deals ranging from $10 million to $100 million, LAVCA said. Firms transacted 30 mid-market deals in the 2015 first half.

Looking out at the next few months, 2016 will likely be a weak fundraising year for Latin America, Ambrose said. LAVCA expects deal activity to keep up, however, especially as big international investors like sovereign wealth funds continue to look to the region for investment, she said.

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The Villarrica Volcano is seen at night in Pucon town, Chile, on May 10, 2015. Villarrica, located near the popular tourist resort of Pucon, is among the most active in South America. Photo courtesy Reuters/Cristobal Saavedra