Latin America set for buyout boom post-Covid amid massive GP interest – survey


Almost three-quarters of private equity firms are planning to deploy capital in Latin America over the next five years thanks to attractive valuations and growing cross-border dealflow appetite, a new survey suggests.

The level of interest in Latin America as an investment destination among GPs outstripped Asia Pacific (62%) and the Middle East (60%) according to the Recovery to Rediscovery: Capitalising on a Changed Private Equity Landscape report from accounting, tax and payroll specialist Auxadi.

It said that appetite should further fuel the already accelerating dealflow in the region, which trebled between 2010 and 2019 before striking a pandemic-induced lull last year.

The report was based on interviews with 100 senior-level private equity investors based in the UK, continental Europe and North America, with average assets under management of €14.4bn.

North American GPs are the most attracted to Latin America according to the survey, with 91% earmarking capital, ahead of the UK’ 75% and double the portion in Europe (46%).

Growing interest in Latin America among private equity investors reflects a widely held view that cross-border deal flow will continue to grow in popularity, Audaxi said.

More than a third of respondents expect the volume of international transactions will bounce back to pre-pandemic levels by the end of 2021, and a further 40% expect this to happen in 2022. Just 16% predict it will take two years or longer.

Almost half cited myriad jurisdictional differences in law and regulatory frameworks and compliance regimes as the biggest challenges to investment in the continent, while one in three flagged cultural differences and the misalignment on valuations between buyer and seller.

Audaxi said that a sizeable proportion of private equity firms have already taken steps to outsource the running of some elements of their fund to third parties, with almost half already outsource regulatory reporting requirements, and a further 38% said they will do so going forward.

Victor Salamanca, CEO at Auxadi, said, “Latin America is a region with great potential for capital-laden GPs, with its growing middle class and early pension reforms having created a significant pool of assets in which to invest And, a continued interest in investment for improved infrastructure.

“Considered by many as the emerging market to invest in, GPs are fully aware that Latin America carries risks and quite a few multiple cultural, legal and regulatory differences that often make it difficult for international firms to operate with confidence.”

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