Europe looks to South America for add-ons

South American companies accounted for 10% of Europe’s add-on activity in the second quarter, according to a report from Silverlight and private equity research firm mergermarket.

European private equity-backed portfolio companies are crossing the Atlantic and heading south to expand their base of operations, according to a report from Silverfleet Capital and mergermarket.

Seven South American add-on acquisitions, accounting for 10 percent of Europe’s overall add-on activity by volume, took place in the second quarter of 2011, according to the report. Most of the acquisition activity involved the service and manufacturing sectors, indicating the maturation of several Latin American economies.

“European backed private equity companies are increasingly traveling further afield to pursue buy and build strategies, to build businesses of scale and to extend their international footprint. We expect this trend to continue over the coming years as companies look to deliver strong earnings growth,” Silverfleet managing partner Neil MacDougall said.

MacDougall was unavailable for further comment.

Overall Q2 deal volume for add-ons remained relatively stable, with 77 add-on acquisitions made compared to 90 in the first quarter. Average deal value fell by £50 million, from £110 million in Q1 to £60 million in Q2.

The report mentioned several recent South American add-ons, including Inaer Aviation Group’s €300 million acquisition of Bond Air Services, an air ambulance business. Kohlberg Kravis Roberts Purchased a 49.9 percent stake in Inaer last year for $924 million. Other recent add-ons include Nordic Capital-backed Danish ambulance services company Falck A/S’s acquisition of Colombian Grupo EMI, as well as Industri Kapital’s purchase of Brazilian Pentec Industrial for industrial weighing company Schenck Process.

Silverfleet is a mid-market private equity firm with approximately €1 billion assets under management.