Brazil leads LatAm private equity surge
International investors remain cautious, despite a strong performance in deal activity this year.
Private equity (PE) deals have recovered sharply in 2019 in Latin America, according to data from the Emerging Markets Private Equity Association (EMPEA).
In the first half of 2019, international PE flows to the region reached $4.4 billion – a record for Latin America deal activity. Brazil led the resurgence, and accounted for 70% of all capital invested in Latin America. PE professionals and bankers point to the progress in Brazil’s pensions reform and the (linked) lower interest rate and inflation environment as the key drivers for deals.
However, the headline figures are misleading, according to some industry participants.
Alastair Stewart, head of Madeleine Research, a firm that conducts M&A due diligence research on behalf of international investors, cautions that the strong deal volume seen in the first half of the year represents the movement of many long-scheduled transactions.
“There is much more activity at the end of the M&A pipeline than further up,” says Stewart. “We still aren’t yet seeing international investors looking at new opportunities in Brazil with any great appetite. I suspect that now these deals – many of which have been waiting for some semblance of financial stability to close – have been done, then this flurry of activity will die down again.”