Sun, Jul 5, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Private Equity Strategies

Movers & Shakers: Latin America Private Equity In 2013

Tuesday, January 22, 2013

By: Bailey McCann, Private Equity Strategies

In our last issue, we examined one of the larger transactions to take place in Latin America in 2012. However, Brazil isn't the only story.  I spoke with Rod Walkey, Managing Director of Latin America Alternatives, an independent private equity fund of funds focused on mid-market and infrastructure funds in Latin America about where he sees the industry headed in 2013. Latin America Alternatives is based in Brazil and has over $1.5bn of private equity investments throughout the region for a major Brazilian institutional investor.

BM: What is the 10,000 foot view of Latin American PE activity right now and into 2013? Is it primarily driven by M&A?

RW: The market is driven mostly by Brazil, around 90-100 transactions in 2012 according to the Brazilian Private Equity and Venture Capital Association(ABVCAP) through Nov-12.  It was slow in the first half of 2012, but we are more positive in our perspective for 2013 as the GDP should recover. Colombia and Peru are increasingly receiving more attention from investors, but to a smaller scale. Mexico has risen in the last 18 months, as a new market as the Mexican pension plans have started to support the asset class, and the economy is recovering from the 2009 depression. Principally, this is driven by primary and secondary acquisitions and some green field developments in infrastructure related sectors.

BM: Is Brazil the only mature story in Latin America going into 2013, given that Argentina is back in trouble and other countries are less mature?

RW: Brazil is the major market, accounting for more than 92% of the investments in the region as of Q3-12. (EMPEA Industry Statistics, Nov-12). Colombia emerges as the second destination with positive perspectives alongside with Peru. Mexico has potential for the upcoming years, but it is still a PE young industry beyond real estate, Chile is a mature economy with few local opportunities for PE investments, and Argentina, unfortunately, is out of target from most institutional investors due the lack of regulatory and legal protection for investments.

BM: Are there any big surprises in the region in terms of specific transactions or areas that are attracting new interest?

RW: No big surprises, sectors related to the increasing consumption of the middle class and the infrastructure build out all over the region have been attracting the majority of the investments in LATAM. Investors remain concerned with potential overheating in entry multiples and capital overhang in the upper end of the market, but the number of opportunities and demand for long term capital in the region, especially in the middle markets, far exceed the capital raised to the region. The current challenges on the IPOs markets reinforces the need for a management driven hands-on approach from the GPs as the holding, as there are few leverage options available in the region and companies in LATAM requires more assistance from GPs.

BM: Are Latin American countries as dependent on China as reports suggest?

RW: The LATAM GDP in a broader sense is more exposed to the Chinese demand for commodities than the typical sectors targeted by PE Funds in LATAM. They rely more on internal, growing demand for basic services, and goods boosted by the increasing disposable income from the middle class, and the associated need for better infrastructure to support the GDP growth. As an example, in the past decade Brazil has added almost 50 MM people to the middle class.

BM: Are there any specific sectors or sub-sectors where you see opportunity moving into 2013?

RW: Latin America Alternative's approach is to invest with local managers, who take no leverage and invest in proprietary deals with a focus on investing into mid-sized companies at lower entry valuations between 5 to 8 times EBITDA. The sectors we like are sectors that benefit from consumer driven demand, and ancillary businesses capitalizing on the $1 trillion of infrastructure build out over the next decade. These sectors include retail, healthcare, logistics, IT, food services, education and healthcare. The exit opportunity is IPO, large private equity firms and international companies looking to establish a footprint in LATAM.

 
This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
Private Equity Strategies
Private Equity Strategies
Private Equity Strategies


Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: New systematic strategy managed alongside research firm outperforms S&P500[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: An emerging CTA manager explains how he runs his strategy, which is based on an index produced by a research firm. Peter Turk is head of

  2. Opalesque Exclusive: New systematic strategy embraces machine learning[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The founder of a New York-based systematic trading firm, which offers a hybrid between alpha strategies and alternative feta at lower fees, describes his approa

  3. Larry Robbins' hedge fund Glenview buys 1m Tenet Healthcare shares[more]

    Komfie Manalo, Opalesque Asia: Glenview Capital Management said it bought an additional 979,482 shares at Tenet Healthcare Corp valued at $53.80 million, raising its stakes in the healthcare services company to 15.16%, reported

  4. Legal - Grayson’s hedge funds under scrutiny for possible ethics violations, Court rejects hedge fund’s motion to block merger of Samsung affiliates[more]

    Grayson’s hedge funds under scrutiny for possible ethics violations From Freebeacon.com: Rep. Alan Grayson is finding himself in hot water over managing hedge funds that bear his name, actions that are in possible violation of House ethics rules. Sitting members of Congress are prohibite

  5. Hedge funds decline in June as stocks tumble on Greek woes[more]

    From Bloomberg.com: Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent

banner