UPSWING FOR THE UNDERCAPITALISED

Recent months have seen a flurry of private equity activity in Asia – nothing new there – but also, perhaps more surprisingly, in Africa and Latin America. For the latter region, this could help address arguably the world's most glaring private equity shortage.

As Jonathon Bond, managing director for investor relations and fundraising at global investor Actis, says: “The demand-supply balance [for private equity capital] has become out of kilter in Asia, it's about in balance in Africa, and it's woefully undersupplied in Latin America.”

The landscape in Latin America, though, has been quietly changing in recent years – perhaps overlooked by those whose attention has understandably been focused on the Asian boom.

One of the larger recent deals in the region was Costa Rica-based Mesoamérica's acquisition of 49.9 percent of cable television provider Amnet. While the terms of the transaction were not disclosed, Mesoamérica tends to make large-scale equity investments of more than $50 million (€39.8 million), says Juan Carlos Rojas, one of the partners at Mesoamérica Capital Partners, the firm's private equity division. Real estate mogul Sam Zell also continued his push into the Latin American market, buying up Chilean mall operator Parque Arauco for $50 million in September through his Chicago-based firm, Equity International.

On the exit side, Newbridge Andean Partners' 4x return on its investment in Colombian retailer Carulla Vivero grabbed attention in August. More recently, HM Capital quietly sold its Argentine cable TV holdings CableVisión and Teledigital to local media conglomerate Grupo Clarín and US-based media investor Fintech. The exit, expected to reap over $450 million for HM and its coinvestors, helped vindicate HM's continuing commitment to the country five years after its investments there were hit by Argentina's economic crisis and currency devaluation.

It hasn't been an easy decade for Latin American private equity, and the region still remains off the allocation lists of many LPs. However, with a growing investment momentum among the region's private equity firms, the region might well achieve more than just a period of recovery, but an era of prosperity.

NEW EMERGING MARKETS FOF LAUNCHES
Focus Capital launched last month as a new independent emerging markets fund of funds manager. The firm will invest in the emerging markets by “allocating between equity, bond, cash and hedge funds through a fund of funds approach,” according to a company statement. Focus' inaugural fund – the Focus Capital Emerging World Fund – is expected to launch in the first quarter of 2007. The firm is headquartered in London and headed by managing director and chief investment officer John Cleary. Cleary was most recently chief investment office rat Standard Asset Management, prior to which he was the head of emerging market debt and global high income at Invesco Asset Management.

CDC BACKS AFGHANISTAN RECONSTRUCTION FUND
CDC, the UK government-backed emerging markets fund of funds, has committed $5.8 million (€4.6 million) to the Afghanistan Renewal Fund, the first private equity fund established for investment in the war-stricken country. Acap Partners, the fund manager headed by Pierre Van Hoeylandt, a former McKinsey management consultant, has raised $20.3 million, including a $5.5 million commitment from Asian Development Bank, according to a statement from CDC. With offices in London and Kabul, Acap also attracted commitments from the Overseas Private Investments Corporation (OPIC) and the Rebuilding Agricultural Markets Program, funded by the US Agency for International Development and high net worth private investors. Acap Partners, which is attracting 10 to 20 investment proposals a month, has a pipeline of 200 potential investments, with entrepreneurs seeking a total of $380 million across sectors.

MERRILL LYNCH MEXICAN DEAL ON THE TABLE
Merrill Lynch Global Private Equity has purchased Grupo Convermex from JPMorgan Partners, the private equity arm of JPMorgan Chase & Co, and other investors. Convermex is a Mexican manufacturer and distributor of plastic disposable tableware products. Financial terms of the transaction were not disclosed. The transaction was advised by Merrill Lynch and JPMorgan Securities. JPMorgan's acquisition of 100 percent of Grupo Convermex from the company's founding family was originally announced in June 2003. Through its $752 million (€596 million) Latin America Fund, JPMorgan Partners acquired Convermex alongside an independent management team.

CONDUIT INVESTS IN POWER GENERATION
New York-based private equity firm Conduit Capital Partners has made two investments in Mexico's power generation sector through its $393 million (€314 million) Latin Power III fund. The fund intends to invest $9 million in the development and construction of Benito Juarez, a hydroelectric power plant in Oaxaca, Mexico. Conduit's local partner in the $28 million Benito Juarez project is Corporación Méxicana de Hidroelectricidad, with whom Conduit has previously worked on three private hydroelectric generation projects. Latin Power III will also invest $8.8 million in the $35 million SOGAP V project, involving the development of nine peak-shaving and cogeneration projects across six Mexican states which will provide energy services to Controladora Mabe, Mexico's largest appliance manufacturer and a 48 percent-owned subsidiary of General Electric.

BRIC BUYOUTSIn the first three quarters of 2006, the combined value of private equity-backed M&A transactions in Brazil, Russia, India and China (BRIC) exceeded $8.4 billion, or 1.8 percent of the value of private equity-backed M&A on a global basis. Meanwhile, the four BRIC markets hosted 6.8 percent of all M&A deals (by value).

FINANCIAL SPONSOR- ALL M&A
BACKED BUYOUTS
MARKET VALUE ($M) # DEALS VALUE ($M) # DEALS % PE-BACKED M&A VALUE TOP INDUSTRIES
Global total 467,791 1,955 2,749,272 24,335 17.0% PE-backed: finance, construction, food & beverage; Total: finance, real estate, transportation
China 5,034 58 68,622 1,597 7.3% PE-backed: technology, construction, finance; Total: telecom, transportation, finance
India 2,570 79 21,748 604 11.8% PE-backed: n.a.; Total: telecom, utiltiy & energy, finance
Middle East 1,296 4 12,729 89 10.2% PE-backed: professional services, holding companies, transportation; Total: telecom, finance, utility & energy
Brazil 701 10 42,446 178 1.7% PE-backed: utility & energy, retail, oil & gas; Total: oil & gas, finance, utility & energy
Latin America (ex Brazil) 623 7 33,342 378 1.9% PE-backed: technology, finance, oil & gas; Total: real estate, telecom, utility & energy
SE Asia 270 6 37,436 1,133 0.7% PE-backed: professional services, publishing, food & beverage; Total: oil & gas, metal & steel, mining
Russian Federation 143 14 55,436 1,010 0.3% PE-backed: n.a.; Total: oil & gas, telecom, mining
Sub-Saharan Africa 10,446 63 0.0%
BRIC 8,448.40 161 188,252 3,389 4.5%