Private equity and venture capital investments in Latin America totaled US$3.5 billion in the first half of 2014, with the information technology sector being the largest recipient of foreign funds.
The data released by the Latin American Private Equity and Venture Capital Association showed VC investment in the region fell by 10% compared with the same period last year. Yet the New York City-based association said it expects the region to have received US$8 billion in PE/VC funds by the close of the year.
The most notable change this time around is that large buyout firms have returned to the market to raise fresh capital.
IT was the top sector both in terms of capital invested and number of deals, accounting for 30% of all PE/VC investments. Healthcare was the second most dynamic sector, with 11 deals totaling US$696 million.
The data showed investment decreased significantly in Chile but moderately in Brazil, while Mexico and Peru saw investment rising. Investments in Mexico totaled US$403 million, compared with US$123 million a year earlier. Peru had US$20 million, up from US$13 million.
Unlike previous years, more and more European funds are joining the queue to invest in Latin America. UK private equity group Cinven, for example, bought Spanish-headquartered Gas Natural Fenosa Telecomunicaciones (GNFT), a fiber-optic network operator in Spain and Latin America. KKR’s pharmacy chains Alliance Boots also expanded into the region through the acquisition of two major retail pharmacy networks in Latin America.
European appetite for increasing exposure to the region was also evident with companies such as France-based firms Michelin and Elis and UK-based Pearson all acquiring companies from PE firms in the region.
“In a parallel trend to 2010/2011 when record amounts were raised in Latin America, we have seen a number of large cap managers including Pátria, Gávea, Advent, and Carlyle launch new funds and secure commitments,” said Cate Ambrose, President & Executive Director, LAVCA.
“Investments reached a six-year high in 2013, so it is natural that managers would focus their efforts on bringing value to portfolio companies and raising funds for future investments,” Ambrose added.