Emerging Market PE Deals Decline in First Half

Aug 14 (Reuters) – Private equity funds that invest in emerging markets may have raised similar amounts of cash in the first half of 2012 than a year earlier, but they used less of it, the Emerging Markets Private Equity Association said on Tuesday.

Investments totaling $9.8 billion in disclosed value were completed in the first six months of the year, down 34 percent from $14.9 billion a year earlier, the EMPEA said.

However, fundraising of $17.2 billion in the first half puts the figure on track to match the $38.5 billion for the whole of 2011, the association said.

The resilience in fundraising levels came from a short list of individual deals closing, “including the largest pan-emerging markets fund raised to date, Capital International’s $3 billion sixth fund, and two of the largest Turkey funds ever raised,” according to the EMPEA.

The top 10 funds of the 60 that held closes through midyear accounted for 75 percent of capital raised, compared with 37 percent in all of 2011 and 35 percent in 2010, the group said.

The belief that emerging markets will grow still drives private equity capital to those countries, EMPEA Chief Executive Officer Sarah Alexander said in a statement.

“However, private equity firms grappling with legal and regulatory uncertainty and anticipated currency depreciation are slowing the pace of investments or alternatively looking to listed markets, which may offer readier opportunities for exit,” she said.

The number of acquisition deals fell 8 percent for China and 25 percent for India, but increased 53 percent in Brazil, 42 percent in the Middle East and North Africa, and 27 percent in Sub-Saharan Africa, the EMPEA said.

Fundraising for China also sank, to $4 billion in the first half from $11 billion a year earlier, while the nation’s share of global capital raised fell to 23 percent from 53 percent.

“In light of growing investor awareness of opportunities elsewhere in Emerging Asia, and the challenging exit and regulatory environment in China, we anticipate a potential shift away from China-only strategies in favor of a more regionalized approach, consistent with the pattern among many Asian funds being raised today,” Alexander said.

Deal activity particularly slowed at the upper end of the market, with the number of deals worth more than $100 million off by a third, the statement said.

(By Luciana Lopez)

Image Credit: Shutterstock.com