Baring Latin America Partners (BLAP), the New York-based private equity operation that is part of Barings Private Equity Partners, is preparing to launch two private equity funds aimed at the Latin American market. These would be the company’s fourth and fifth funds investing the region since 1995.
BLAP is to launch a $200m Mexican fund to make investments of around $15m in growth capital stage companies, expansion and buy and build situations.
The Latin American specialist is also planning to raise a $300m fund that will predominantly invest in distressed companies in Argentina and Brazil.
Baring’s foray into the region comes as other private equity firms that have been active investors in Latin America, such as Hicks, Muse Tate & Furst and Exxel Group, have decided to freeze new investments in the region. Data from Venture Equity Latin America reveals that private equity investment in Latin America has slumped to $995m in 2001, from $5bn in 1998.
According to Baring Latin America Partners’ managing partner, Varel Freeman, growing the group’s presence in the region is deliberately contrarian: “We are seeing private equity firms retrenching from the region and they are actually giving some opportunities to people like us who have decided to stay the course. We see two distinct types of opportunities. One is Mexico, where the economy is vibrant and growing. We also focus on Brazil and Argentina, where we see the opportunities being much more on the value and distressed asset side.”
Freeman expects that a significant percentage of the group’s current investors will commit to the new funds. These include the World Bank, the InterAmerican Development Banks and ING, Barings Private Equity Partners’ parent which typically provides between 15 per cent and 20 per cent of its private equity arm’s capital.
Investments are likely to be made alongside co-investors such as Venrock Associates and Insight Capital Partners. Exits will mainly be through trade sales. “We don’t delude ourselves into thinking that the capital markets are going to develop much faster”, said Freeman.
Baring Latin America Partners has managed three exits in the region this year. These were Absormex in Mexico and Injebet Embalagens and Mobitel of Brazil
Baring Latin America Partners’ earlier funds, Baring Private Equity Mexico, Baring Private Equity Latin America and the South America Growth Fund, are fully invested. Fundraising for the new vehicles is expected to get underway in early 2003.