Private equity and venture capital dry powder in Latin America highest since 2015 — Preqin reports

LONDON, Feb. 08, 2024 (GLOBE NEWSWIRE) -- Preqin, the global leader empowering the alternatives community with essential data and insight, published its Preqin Territory Guide: Private Equity and Venture Capital in Latin America 2023 report.

The report finds that Latin America’s assets under management (AUM) in alternatives saw continued growth in 2023, driven by private equity and venture capital (VC). Combined private equity and VC AUM reached $49.2bn as of March 2023 – the latest data available. This was up from $45.8bn, or by 7%, from the end of December 2022.

Despite the global slowdown in private equity and VC fundraising and deal value in 2023, Preqin data indicates that alternatives AUM growth will continue in Latin America in 2024. This growth will depend on how the region manages the ongoing uncertainties around political instability, inflation, and rising interest rates.

Private equity and VC dry powder and number of active investors increases

As of March 2023, dry powder represented $13.4bn, or 27%, of AUM – which is the largest stockpile of dry powder in the region since 2015, when it represented 31% of AUM. Preqin research shows the increase in private equity and VC dry powder is attributable to investor apprehension given uncertainties in the market.

However, attesting to Latin America’s resilient growth in alternatives, the number of active private equity and VC investors has risen rapidly. From the end of 2018 to October 2023, they almost doubled from 201 to just under 400. This strong increase in the number of active investors highlights that the region’s economic evolution is well suited to alternatives investors.

Private equity deals dimmed in 2023 amid global slowdown

Latin America private equity deal flow mirrored the deceleration of global private markets, falling to a five-year low for the region. As of October 2023, the aggregate value dropped by 81% to $2.5bn across 85 deals, from $13.5bn over 139 deals in 2022. In comparison, global private equity deal flow dropped by 19% to $76.5bn, when comparing Q3 2022 to Q3 2023. The $76.5bn in aggregate deals value in Q3 2023 was across 1,558 deals.

Despite the fall in private equity deals value and volume in Latin America in 2023, changes to supply chains owing to geopolitical trends and the COVID-19 pandemic are set to benefit Latin America. The rise of nearshoring means the US market is reorienting its supply chains closer to home.

David Dawkins, Financial Writer at Preqin, says: “For all the region’s challenges, Latin America presents investors with opportunities. Coupled with the momentum propelled by nearshoring, private investment is unlocking the potential that rests in its growing private equity market.”

Additional key findings of the Preqin Territory Guide: Private Equity and VC in Latin America 2023 include: 

• Private equity fundraising slows: Latin America private equity fundraising fell to a 10-year low in 2023. It dropped to $0.6bn by October 2023 (the latest data available), from $3.4bn in 2022.

• Private equity deal type: Consumer discretionary deals accounted for half of the ten largest private equity deals completed in the last two years, the biggest being the purchase of LATAM Airlines Group for $4.5bn in December 2022.

• Brazil and private equity deals: Deals in the consumer discretionary category were notable in Brazil, in addition to Mexico. Marfig Alimentos’ Cattle Slaughtering and Deboning Operations was a company bought out in an add-on & merger for $1.5bn in August 2023.

If you would like more information or would like to speak with the report author, please contact Dawn Bowles at dawn.bowles@preqin.com.

About Preqin

Preqin, the Home of Alternatives^™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.