By Guillermo Parra-Bernal
Reuters

March 21, 2012 – Buyout firms investing in Latin America raised a record $10.3 billion in 2011, driven by growing fundraising efforts by local players and a surge in interest by global investors, an industry group said on Wednesday.

Fundraising jumped 27 percent from 2010, when investors funneled $8.1 billion of their money into regional private equity funds, the New York-based Latin American Venture Capital Association said in a statement distributed on Wednesday. In 2011, Brazil attracted 78 percent of total capital committed for the region.

Still, momentum is building in Mexico, Colombia, Chile, Peru and Argentina, where less competition than in Brazil for existing assets is bringing the attention of dealmakers. Some Brazilian buyout firms are also expanding into those countries, helping expand private equity investments throughout the region.

“While Brazil funds captured the greatest amount of committed capital in 2011, we continue to see a healthy appetite for other regional markets,” Cate Ambrose, president of LAVCA, as the group is known, said in a statement.

Brazil kept luring most commitments and investors last year, because of its diversified economy, which is Latin America’s largest.

According to LAVCA, five funds raised by local firms Gávea Investimentos, Vinci Partners, BTG Pactual and Patria Investimentos accounted for $7.3 billion of total capital commitments for the country, “illustrating the strength of Brazil’s experienced asset managers and the desire of global investors for exposure” to the country.

As opposed to previous years where large players raised money for pan-Latin American investments, buyout firms are not opting to invest through emerging market-dedicated funds or simply target a country, such as Brazil.

Regional funds accounted for $1.1 billion of total capital committed last year, LAVCA said. The Carlyle Group, for instance, raised a $776 million pan-South American fund in 2011.

LAVCA compiled the numbers in a confidential survey that included about 250 firms.

EXITS SURGE, DEAL VALUE FALLS

Deals have grown in size over the past three years, which indicate that private equity investors are beginning to perceive the long-term benefits of investing in Latin America. Fundraising for Latin America’s private equity industry surged in stark contrast to declines in activity in the United States or Europe, bankers said.

Exits, or the way by which buyout firms cash in gains in the companies invested over time, also surged in 2011. According to LAVCA, there were 53 private equity-backed exits, which include stock offerings and strategic share sales, valued at $10.6 billion in 2011 — a 204 percent increase from the prior year.

Market turmoil stemming from the escalation of Europe’s debt crisis hampered exits in the second half, LAVCA added. “Strategic sales were the preferred exit strategy,” the statement said.

About 50 percent of last year’s buyouts took place in Brazil, where 64 percent of the region’s capital commitments where invested, LAVCA said. Forty-six percent of the industry’s buyouts in Latin America took place in Brazil in 2010.

Investment bankers including Jean-Marc Etlin, head of investment banking for São Paulo-based Itaú BBA, expect a climb in private equity-related takeovers to spur a recovery in mergers and acquisitions activity in Brazil — which last year saw the value of deals tumble 35 percent from 2010.

The numbers also show the degree to which investor confidence in Brazil is swelling even as risk-taking wanes in the face of Europe’s debt crisis and what investors see as timid efforts by President Dilma Rousseff’s government to tame inflation and let the nation’s currency trade freely.

In recent years, jobs and wages across Latin America have surged, allowing millions to join the emerging middle class that is now buying everything from cars and homes to plane tickets and beauty-related products.

Mexico saw a significant increase in the number of deals and amount of capital committed to companies in each country, LAVCA said.

Firms in Latin America’s second-biggest economy completed 21 deals worth $456 million, an increase of 117 percent when compared to 2010, the group said.

Other regional markets had increases in deal totals or the amount of capital invested, including Argentina, Colombia and Peru, the statement added.