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.
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“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.
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