Latin America-focused private equity and venture capital funds raised $7.2 billion, including one mega fund larger than $1 billion in 2015, according to the Latin American Private Equity and Venture Capital Association (LAVCA).
There were 52 full or partial fund closings last year, opposed to 35 closings that raised a record $10.39 billion the previous year.
“We were pleased to see there’s still very strong activity,” LAVCA president and executive director Cate Ambrose told Private Equity International. “We were able to get to $7.2 billion with only one billion-plus fund, which demonstrates there were quite a few mid-market-sized funds.”
Funds that raised capital in 2015 include The Abraaj Group’s Abraaj Latin America Fund II, which had raised $75 million towards its target of $600 million as of August, and HIG Capital’s HIG Brazil & Latin America Partners is targeting $685 million, according to the firms' separate US Securities and Exchange Commission filings.
Private equity and venture capital firms invested $6.5 billion through 310 deals last year, down in value from $7.87 billion but up from 306 deals in 2014. This was driven by 14 large-cap transactions worth $3.8 billion mostly in the oil and gas, healthcare and energy sectors, and 68 mid-market deals worth $2.2 billion mostly in the information technology and consumer and retail sectors, the report said.
Broken down by country, Brazil saw $3.2 billion invested in its market through 149 deals, down 30 percent from $4.57 billion invested through 141 deals in 2014.
Whereas in 2014 Brazilian investment accounted for 58 percent of total capital invested in Latin America, last year it accounted for just 49 percent. This could be partially due to the record $2.3 billion invested through 88 deals in Mexico last year, up 76 percent from $1.31 billion invested in the previous year.
“Everyone recognises the environment in Brazil today is not going to change in the next 12, 24 months,” Ambrose said. “Mexico is a story people are extremely excited about right now. That economy is correlated to the US economy, not nearly as dependent on commodities but more on manufacturing. Mexico is driven by a whole set of different factors.”
Investment in Peru jumped 182 percent year-over-year to $378 million through 19 transactions, the report said. This was driven by The Carlyle Group’s activity there, with its 2009-vintage Carlyle South America Buyout Fund investing in transportation company Hermes Transportes Blindados and tourism operator Vasco Turismo in Peru last year.
Colombia has been negatively affected by the peso depreciation that is expected to continue downward, Ambrose said, while Argentina elected in October “a very pro-business, investor-friendly” president, “who is doing everything he can to court new dollars,” she said.
Ambrose emphasised that it’s a strong buyer’s market in Latin America right now, due to the currency exchange rate versus the dollar and distress in the market due to low commodity prices and political turmoil. She explained that the buyer’s market started around the end of 2014, when Dilma Rousseff was re-elected as president of Brazil and demand from China began to soften.
“We’re seeing distressed opportunities for the first time in the region that weren’t there historically,” Ambrose said. “We expect it to be a significant, but not huge, part of the deals this year.”
Given this environment, it may be harder for funds trying to exit their investments.
The region saw $3 billion in exits last year, a 35 percent drop from the $4.64 billion exits in 2014. There were 46 exits, plus six undisclosed to LAVCA, compared with 60 exits in 2014, the report said. And for both years, more than half of the exits were sales to strategic, rather than financial, buyers.
“It’s not going to be a strong seller’s market for a while,” Ambrose said.
LAVCA gathered data from more than 250 private equity and venture capital firms active in Latin America and the Caribbean.