Private equity’s powder still dry
As the global financial crisis begins to take its toll in Latin America, several banks are starting to look towards private equity opportunities. "Investment banks are very creative at finding ways to charge fees," says Matt Cole, managing director at North Bay Equity Partners, a Latin America focused private equity house. "In 2006/07 the investment banks encouraged companies to list on the stock exchange. Now the banks are starting to pitch private equity deals rather than public equity deals." Antonio Neto, debt banker at HSBC, says: "It makes sense for the investment banks to consider private equity investments when the capital markets are so quiet."
Goldman Sachs and Morgan Stanley are among those expected to be active in the region after already acquiring telecoms and electronics assets in the summer. Optimism is the flavour of the day for private equity players. Cole says: "The current liquidity crunch will create opportunities for private equity investors – unlike with other crises in the past, this time there is a lot more dry powder available both for established regional fund managers, as well as those in the process of deploying capital."
He reckons private equity investment will pick up next year as corporates face liquidity and refinancing risks.