Secondary PE Player Eyes Regional Spree

Secondary private equity firm Paul Capital predicts continued growth in LatAm private equity, despite the global financial markets slump. “People are beginning to realize perhaps that maybe too much capital went to Asia,” says David de Weese, partner for secondary investments at Paul Capital. “The emerging markets have some other interesting plays besides India and China, so I think you’re going to see more capital coming into Latin America,” he tells LatinFinance in a recent interview. Paul Capital, which globally manages more than $6.6bn, announced earlier this year that it had expanded its EM presence by opening offices in Hong Kong and Sao Paulo. “We like a lot of geographic diversification as well as industry diversification,” says de Weese. “We do like the [LatAm] region . . . markets that are not well served sometimes provide a lot of upside,” he adds. “Volumes have been increasing significantly since 2002,” says Duncan Littlejohn, MD for secondary investments and head of Paul Capital’s Sao Paulo office. “There’s a critical mass building up and that’s the basis of our business,” he adds. “Opportunities going forward have never been better for Latin America on a primary basis,” says Littlejohn. “You have several factors playing in its favor,” he adds, listing them recent fundraising, more attractive valuations for buyers, an absence of M&A financing, debt refinancing needs and the death of IPOs. “There’s a fair amount of dry powder in the hands of a half dozen private equity funds and that’s a pretty good position to start from,” says Littlejohn. He adds that the larger funds are mostly US-based, along with some large players in Brazil, including BNDES. “We’re also seeing some European pension funds now coming, especially to Brazil, in terms of making commitments to funds,” says de Weese. Paul Capital has roughly $200m invested in LatAm. Most of its activity is in Brazil, Chile, Argentina, Mexico, Colombia, with Peru starting to see interest.