Advent International has acquired a 50 percent stake in Colombian asset manager Alianza Fiduciaria, according to a statement from Advent this week. The firm did not release financial details of the transaction.
This is Advent’s second transaction in Colombia since it opened its office in Bogotá in 2011. Advent’s first deal was acquiring a majority stake in special pharmaceutical products marketer, Biotoscana Farma, in November 2011, according to a source familiar with the firm.
Alianza Fiduciaria is an independent trust and asset management company that manages 2,500 trusts and $9 billion of assets under custody, in mutual funds and private equity funds, as stated in Advent documents. The company was founded by insurance brokerage and financial services firm Organziacion Delima.
Boston-based Advent started operating in Latin America in 1996 and Alianza Fiduciaria is its 43rd investment in the region and 12th investment in the Latin America financial services sector, according to the source.
Advent has partially or fully exited 33 of the 43 investments, which have been made across nine countries in the region. The source revealed Advent’s first Latin American deal was the buyout of Aeroboutiques de México in December 1996. The company went public on the Mexican stock exchange the year after and was acquired by Áreas of Spain in 2001, according to the source.
The firm’s Colombian office focuses on sectors including retail, energy and financial services. The bureau acts as a platform for Central American and Peruvian expansions, according to Advent’s website.
Mauricio Salgar is the managing director of the office. Salgar replaced Diego Serebrisky, only a year after the office opened, Private Equity International previously reported. Serebrisky left to pursue other business interests after working with the firm’s Mexico City office for 13 years, prior to working in Bogotá. Advent’s other Latin American offices are in Mexico City and São Paulo, as listed on the firm’s website.
Latin American expansion
Latin American expansion has been a rising trend for years, among GPs and LPs alike. According to the Emerging Markets Private Equity Association’s 2012 Global LP Survey, the attractiveness of Latin America for GP investments has steadily increased each year since 2008. By EMPEA’s scale, where ‘10’ is least attractive and ‘1’ is most attractive, Latin America’s attractiveness was a ‘7’ in 2008 and a ‘1’ in 2012. China and India are emerging markets whose attractiveness has declined from ‘1’ to ‘3’ and ‘2’ to ‘6’ respectively, over the same time period.
In fact, 38 percent of LPs who are exposed to private equity in Latin America expect their Latin American commitment pace to pick up in the next 12 months, according to a 2012 Coller Capital and Latin America Venture Capital Association survey.
This is good news because fundraising has recently slowed in the region. Only$6.82 billion of capital was raised in Latin America in 2012, compared to $10.93 billion in 2011 and $9.05 billion in 2010, according to PEI’s Research and Analytics Division.
Brazil is a prime contributor to this slowdown. Fundraising in Brazil peaked in 2011 at $7.87 billion.. It slumped last year to$4.63 billion, PEI data revealed.
Overcrowding, which led to increased pressure on valuations and multiples, was one of the reasons why Brazil has cooled, PEI previously wrote. The country’s economy can also be blamed. Brazil’s GDP grew less than 1 percent last year, compared to 2.7 percent in 2011 and a whopping 7.5 percent in 2010, according to the International Monetary Fund’s Economic World Outlook 2013. Things could shape up there after FIFA settles in for its 2014 World Cup, however.
…middle class consumption in the country is accelerating – a development that will be a key driver of business growth.
Brazil’s numbers are contrasted by solid growth in other Latin American countries. Colombia’s GDP grew 4 percent last year, 6 percent in 2011 and 4 percent in 2010, according to IMF’s Outlook. Peru has posted GDP growth between 6 and 9 percent for the last three years.
At EMPEA and the International Finance Corporation’s Washington DC conference in May, the majority of the audience felt the Andean region of Latin America would provide better private equity growth opportunities than Brazil or Mexico, PEI reported earlier.
GPs have jumped on these opportunities.
To kick off the year, the Andean region’s pioneer firm, Bogotá-based Altra Investments closed its second flagship fund on about $356 million, surpassing its $350 million hard-cap. The Carlyle Group closed its debut Peru fund on $308 million, shortly after. Then, Peru-based Nexus Group closed its second fund on $600 million.
Countries like Peru and Colombia are being targeted as platforms on which to build pan-Andean businesses, Cate Ambrose, president and executive director of LAVCA, told PEI in May.
Colombia is newer to the private equity game, four funds closed in the region in 2011 and two closed in 2010, according to PEI data. Data for 2012 isn't available. Regulations on private equity fund formation and operation were lifted in 2010. Colombian fund managers are no longer required to use a broker or fiduciary and private equity firms are allowed to invest abroad and create regional funds, PEI previously disclosed. Fund managers are also permitted to make foreign investments, without having at least $10 million under management.
Economic growth and dissipating fears of violence and corruption have led to a friendlier regulatory regime in the country.
Serebrisky cited Colombia’s strategic location and growth prospects, when he discussed the country’s appeal in an Advent statement: “Colombia has the fourth-largest economy and third-largest population in Latin America and a stable government … importantly, middle class consumption in the country is accelerating – a development that will be a key driver of business growth.”