Six years after making its debut in the region, Advent International has closed its second Latin American private equity fund with $265 million in commitments. Latin American Private Equity Fund II (LAPEF II) will make late-stage investments primarily in Argentina, Brazil and Mexico.
Like its predecessor, Latin American Private Equity Fund 1 (LAPEF I), a $225 million fund raised in 1996, Advent’s latest fund will take controlling positions in late-stage, cash-generating companies, with a bias toward services deals. LAPEF I invested two-thirds of its capital in Mexico and the remainder in Argentina and Brazil. The second fund will do the same and may also extend its reach into Chile.
“It’s no different than the first fund -it’s exactly the same strategy and exactly the same team because that strategy was quite successful,” says Ernest Bachrach, Advent’s Miami-based chief executive of Advent’s Latin American operations. At the end of 2001, Advent’s first Latin American fund posted a 20% net IRR, Bachrach reports.
Some things, however, have changed. Since Argentina’s financial crisis hit its peak in December, its effects have trickled over into Brazil. Foreign investors have pulled out of both countries, and U.S. banks that were once active in the region, like J.P. Morgan Chase & Co., have scaled back their exposure. Both currencies have weakened and Brazil’s upcoming presidential election is stirring up even more uncertainty among investors. For private equity investors, all those are good things.
“Valuations have dramatically fallen and so have [the number of] competitors,” says Bachrach.
Thus far, Advent’s new Latin American fund has limited its activity to Mexico. It has closed a $50 million deal to merge Imagen Fuera de Casa and the operations of Anuncios y Servicios to create Mexico’s second-largest outdoor advertising company. Advent is expected to finalize an investment in Mexico’s AeroComida, an airport restaurant operator, in the coming week.
With operations in Buenos Aires, Mexico City and Sao Paulo, the fund should be fully invested in three years. Its average transaction size will fall between $10 million and $100 million.
Almost 70% of LAPEF II’s limited partners are return investors. About two-thirds of the fund’s LPs are from the U.S., while the remainder come from Europe. Investors in the fund include GE Capital, HarbourVest Partners, Inter-American Investment Corp. and International Finance Corp.
Contact Carolina Braunschweig