Latin American Private Equity Remains Relatively Strong Despite Global Economic Crisis,...

Latin American Private Equity Remains Relatively Strong Despite Global
Economic Crisis, Finds Annual KPMG Poll of PE Executives

NEW YORK, Feb. 16 /PRNewswire/ -- Private equity (PE) investors in Latin
America don't expect the region's deal market to begin recovery until possibly
2010, but say it continues to offer greater investment opportunity than many
other areas, according to the 2009 Annual Latin America Private Equity Survey
of PE stakeholders by KPMG LLP, the audit, tax and advisory firm.

While all of the respondents to the KPMG poll said the global economic crisis
had affected Latin America, 67 percent of them said it had only a moderate
negative impact on the region. Further, the executives (45 percent) said Latin
America had actually become more attractive to investors during the world
economic crisis, and they expressed measured optimism on world investments in
the region for 2010-2012.

"There are two current PE investment tales to tell in Latin America," said
Jean-Pierre Trouillot, a Miami-based partner in KPMG's Advisory practice. "A
great deal of confidence exists for long-term PE activity in Brazil, Mexico
and Colombia, while countries such as Argentina continue to rank low as
investment targets."

According to the KPMG survey, 63 percent of the PE industry executives said
their 2008 return on investment (ROI) had stayed flat or increased, compared
with 37 percent who reported lower ROI.

"Some continued strength in the region appears to indicate that the Latin
American marketplace remained somewhat sheltered from the global market
crises. This could be tied to how these countries nurtured organic growth of
their own middle classes, thus avoiding the economic imbalance that foreign
investment has posed for central and eastern Europe, as well as parts of
Asia," Trouillot said.

Therefore, Brazil's private-equity market remains relatively attractive, said
Trouillot. He added that while Mexico maintains its strong position among
Latin America's top investment targets, aided by recent regulatory changes
that encourage local investment, the economy there has been under more strain
than the rest of the region because it has close business ties with the United
States. In addition, survey respondents placed Colombia behind Mexico and
Brazil, respectively, as a target for investments in the next two years,
followed by Peru.

Meanwhile, the study also found that 45 percent of respondents said Latin
America had become more attractive to PE investment during the economic crisis
and 14 percent said there was no change, while 30 percent said the region had
become less attractive. In addition, 58 percent of the respondents said they
expected higher world investment in Latin America during 2010-2012, while 12
percent said investment would remain steady and just 29 percent expected lower
world investment in the area during that period.

Trouillot pointed out that despite some strength in PE in Latin America,
stakeholders looking to make investments there have expressed concerns about
exit opportunities, given the current market.

Asked how the 2009 global economy will affect their Latin America investments,
21 percent of respondents said they will not be able to implement a planned
exit strategy and another 21 percent said they may have going concern issues,
while 30 percent said they will have to turn to organic growth and cost
reductions to weather the 2009 economy. Others said they will be looking for
more investments to strengthen a company's position (14 percent) and for
additional acquisition opportunities prompted by the crisis (14 percent).

"Considering the impact of the global economic crisis on M&A activity in
general, exit alternatives are more limited. Therefore, 2009 will be a year to
focus on existing portfolio companies by making operations more profitable,"
said Trouillot. "But the down market has also created opportunities."

He said some fund managers have expressed an interest in either healthy
companies that may need minority investors or in non-core businesses that
organizations may seek to divest as companies look to manage their exposure
and raise capital to service large amounts of corporate debt that is expected
to come due in 2009.

"PE can be a source of capital for healthy businesses, which become even more
attractive when those operating units will need few management changes to
succeed. But investors must exercise caution as they investigate potential
deals, because the region still lacks a consistent track record of
transparency," said Trouillot.

Respondents also ranked the most promising industry sectors, identifying
infrastructure (47 percent) and energy (26 percent) as the most attractive for
investment, followed by consumer markets (14 percent), health care (8
percent), financial services (4 percent) and communications (1 percent).

Fund-raising, according to 86 percent of the PE stakeholders polled, was
expected to decrease in 2009 compared with 2008, while 9 percent reported
fund-raising at the same levels as last year, and 4 percent reported increased
fund-raising. Likewise, 79 percent of fund managers expected a decrease in
2009 investment in Latin America, 9 percent said they expected the rate of
investment to remain flat, and just 12 percent expected a modest increase in
the year to come.

"We have clearly seen hedge funds pull back compared with the more active
years earlier in the decade. However, with the encouragement of government,
local private investors and local pension-funds have filled some of those
gaps," said Trouillot.

KPMG polled more than 110 private-equity stakeholders attending The
Economist's 11th Annual Conference on Latin America Private Equity in Miami on
Feb. 11, 2009.

About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S.
member firm of KPMG International. KPMG International's member firms have
137,000 professionals, including more than 7,600 partners, in 144 countries.

Contact: Bob Wade
KPMG LLP
201-307-7482

SOURCE KPMG LLP

Bob Wade of KPMG LLP, +1-201-307-7482