Fundraising for Brazil buyouts to rise in 2014, Lavca says

RIO DE JANEIRO Tue Apr 15, 2014 8:14am EDT

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RIO DE JANEIRO (Reuters) - Fundraising among private-equity and venture capital firms in Brazil is expected to rise this year, a senior industry executive said, a move that could help propel a fresh round of acquisitions in the infrastructure, logistics and information technology sectors.

Fundraising by private-equity and venture capital firms totaled $2.34 billion in Brazil last year, a fall of 35 percent compared with 2012, the Latin American Private Equity and Venture Capital Association said late on Monday. The amount represented 43 percent of the $5.5 billion raised across Latin America, the group, known as Lavca, said.

Cate Ambrose, president of New York-based Lavca, said in an interview late on Monday that slower growth and eroding confidence in Brazil, coupled with a weaker currency, helped push down asset valuations and made potential takeover targets attractive. The largest Brazilian and pan-regional private-equity firms did not undertake major fundraising efforts last year, partly explaining the large annual drop seen in 2013.

"Fundraising will gain momentum this year," Ambrose said on the sidelines of an industry event in Rio de Janeiro. "This shows that the industry is deepening. It's a good sign for activity."

Getting new money from investors could turbo charge the buyout industry's ability to step up acquisitions. Private-equity buyouts neared $6.1 billion in Brazil last year. Grupo BTG Pactual SA (BBTG11.SA), Patria Investimentos Ltda and Gávea Investimentos Ltda are among firms considering raising money for new funds this year, industry sources told Reuters.

Fundraising among private-equity firms has slipped every year since 2011, when a record $10.3 billion was reached, allowing most buyout firms to refocus on investing. A recovery in fundraising this year indicates that risk-taking is on the rise again and that buyout activity in the region, especially in Brazil, is maturing.

Ambrose's remarks echo those of David Rubenstein, co-chief executive officer of Carlyle Group LP (CG.O), who said at the same conference that Brazil and China will surpass the United States as the world's largest recipients of investor money for private-equity investments by the end of the decade.

Demand for emerging markets investment will grow, despite facing more competition from a recovering U.S. economy, as a favorable labor market, rising demand for services in the wake of household income gains and a need for better infrastructure offer investors a healthy balance between risk and return.

The current level of exits, which has remained stable in the past two years, is not worrisome, Ambrose said, referring to the process by which private-equity funds cash out some of their investments. Exits usually take place in the form of a sale to a strategic investor or a stock offering in a financial bourse.

Ambrose said that buyout firms need to accelerate divestments in Colombia, where that situation is becoming an issue. While a vast reform package undertaken by the Mexican government has made the regulatory framework a little shaky, private-equity activity looks promising there, she noted.

(Reporting by Guillermo Parra-Bernal; Additional reporting by Luciana Bruno in Rio de Janeiro; Editing by Sofina Mirza-Reid)

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