Private equity firms eye potential in Latin America
Latin America has been a relative backwater for private equity firms. Could better equity market conditions in the region drive an uptick in activity?
Latin America faces a structural issue when it comes to private equity: the region remains a buyer’s market for these funds, while, if anything, the dynamics are increasingly skewed towards those international firms that operate in the region. And their numbers are dwindling.
“In Latin America today, there are fewer and fewer [international private equity firms],” says Dirk Donath, managing director at US-based private equity firm L Catterton responsible for Latin America strategy. “A number of funds have shut or have left the region and moved on. And so now there are only really a handful of regional funds. And when you get above $400 million – and certainly $500 million [in investible funds], you are really only counting using one or two hands.”
Some of the larger markets, such as Brazil and Mexico, have country-specific funds in operation, but in general the demand for capital from private companies far outstrips the supply of finance. The smaller, growth-orientated companies that the banks tend to avoid beat a path to those PE firms that have a Latin America presence.