Private equity and venture capital firms committed $7.9bn to investments in Latin America in 2012, representing a five-year high and a 21% increase over 2011, according to data released by the Latin American Private Equity and Venture Capital Association (LAVCA).
The $7.9bn total reflects 237 investments, a 37% increase in the number of deals from the previous year. Seven large firms that had raised over $11bn for pan-regional and Brazilian funds in 2010 and 2011 put that money to work in new deals across a range of markets and sectors.
Investments in consumer-related sectors dominated in 2012, capturing 40% of the $7.9bn total. Consumer retail represented $2.2b of investments, with the rest coming from deals in financial services, restaurants, education, fitness, healthcare and consumer goods. IT deals also posted strong growth in 2012, with both the number of IT deals and dollars invested in the sector more than doubling from 2011.
As in previous years, Brazil was the largest market for PE/VC investments in Latin America, accounting for 72% of the total invested and 62% of the total deals. In Mexico, the total number of deals was on par with 2011, but dollars committed increased by 50% over 2011. Activity in the Andean region was driven by an increasing number of cross border deals, with managers in Colombia, Peru in Chile investing across all three markets.
Fundraising for private equity and venture capital in Latin America in 2012 was dominated by smaller funds, with $5.6bn committed to 42 closings. The 2012 fundraising figure represents an important shift from 2010 and 2011, which saw record totals of $8.1bn and $10.3bn respectively, as managers targeted fund sizes under $500m. A total of 40 managers reported 42 partial or final closings in 2012, versus 35 partial or final closings from 28 firms in 2011.
Rather than representing a change in the appetite of international investors to commit capital to Latin America, the decrease shows a fundamental shift in the size of the funds being marketed.
“It was another dynamic year for private equity and venture capital in the region,” said Cate Ambrose, President of LAVCA. “We continue to see international firms moving into Latin America, at the same time that new funds are being formed across Brazil, Mexico, Peru, Colombia, Chile and other smaller markets. Fundraising was much less concentrated, with more firms in the market, as compared to previous years. That, and the record level of deals, point to a deepening and maturing of the investment ecosystem.”
One notable development in 2012 was the continued expansion of venture capital investment in technology companies in Brazil and other markets, with both international and Latin American VC firms raising new funds and backing new start ups.
Exit activity in 2012 returned to 2010 levels, following an extraordinary year in 2011 when two to three firms generated over $6bn from strategic sales and two large IPOs. A total of $3.8bn was generated in 44 exits in 2012, driven by a vibrant M&A market across Latin America.
The Latin American Private Equity & Venture Capital Association (LAVCA) is a not-for-profit membership organization dedicated to supporting the growth of the private equity and venture capital industry in Latin America and the Caribbean. LAVCA’s membership is comprised of over 150 firms, from leading global investment firms active in the region to local fund managers from Mexico to Argentina. Member firms control assets in excess of $50 billion, directed at capitalizing and growing Latin American businesses. LAVCA has been collecting proprietary data on PE/VC in Latin America since 2008 when the first LAVCA Industry Data survey was conducted. LAVCA Industry Data is based on a confidential survey of fund managers and secondary sources, creating the first reliable source of data on private equity and venture capital in Latin America. The number of LAVCA member firms and other industry participants reporting investment activity continues to increase year-on-year, reaching nearly 250 in 2012.