Private Capital Firms Report Investments of US$4.4bn in Latin America in 2008
New York, March 30, 2009 – Over 100 private equity and venture capital firms reported making 184 investments totaling over US$4.4bn in 2008, according to a new study by the Latin American Venture Capital Association (LAVCA) and The Wharton School.
Five countries that have achieved or neared investment grade status in recent years – Brazil, Mexico, Colombia, Peru and Chile – dominate the regional private equity landscape. Almost 80% of the companies that received private capital investments in 2008 were based in those markets.
“We are very impressed by the level of response to this survey effort, which has allowed LAVCA to identify dozens of transactions that were previously unreported. As a result we have a far more detailed picture of PE and VC in Latin American markets. LAVCA and Wharton are already working on further expanding the reach and scope of this industry census for 2009,” said Cate Ambrose, LAVCA’s Executive Director.
Fundraising for the year totaled US$6.4bn, with 45 private equity and venture capital firms reporting new capital commitments. The majority of capital raised for Latin America went to regional funds (21%) and to fund managers based in the two largest markets, with Brazil capturing 48% and Mexico 15%. Peru and Colombia were also represented, with three new funds raised in each market and several managers aiming to close on commitments in the first half of 2008.
Despite the global chaos in financial markets, five firms closed on US$770m in commitments during the last quarter of 2008. Latin America has had relatively limited exposure to the banking and credit crises plaguing developed and some emerging economies. Banking systems are highly regulated and there is typically little leverage in acquisitions.
Hot sectors for deals reported in 2008 included large scale investments in natural resources, alternative energy, infrastructure, agriculture and real estate. Fund managers also reported multiple deals in industries that serve Latin America’s expanding middle and professional classes – education, healthcare, consumer products and financial services.
A majority of deals reported in Argentina were in seed and early stage venture capital, targeting sectors such as information technology, life sciences and entertainment. Political and economic risk is high in Argentina, but the country is widely recognized for its entrepreneurial culture.
In a year marked by the lack of liquidity in global markets, private capital firms active in Latin America reported exits from 54 portfolio investments. Sales to strategic buyers predominated, as Brazil’s IPO boom ground to a halt.
The LAVCA-Wharton survey effort represents the most comprehensive study of PE and VC firms investing in the region to date. Firms reporting information included large global players headquartered in New York and London and emerging managers raising their first funds in Sao Paulo or Bogota. Faculty and students from the Wharton School partnered with LAVCA in designing the research methodology and contacting fund managers.
The full survey findings will be published in May 2009 in the first annual LAVCA Industry Report.
About the Latin American Venture Capital Association:
LAVCA is a non-profit industry association dedicated to promoting private equity and venture capital investment in Latin America and the Caribbean. LAVCA publications include the Annual Scorecard on the Private Equity and Venture Capital Environment in Latin America.
FOR MORE INFORMATION CONTACT:
Latin American Venture Capital Association
589 Eighth Avenue, 18th floor
New York, NY 10018