Private equity investors’ response to whipsawing global public markets is more often than not “keep calm and carry on.”
That seems to be the case in emerging markets, according to the latest annual data published by the Emerging Markets Private Equity Association.
Although it may be somewhat immune from the immediate effects of public market gyrations, the private equity industry doesn’t exist in a vacuum. Macro themes, including slowing growth, currency fluctuations and an abundance of capital could factor more heavily into deal-making in the year ahead.
1. The amount of capital deployed into deals in Brazil, Russia, India and China continued a slow decline since peaking in 2011, with investment in China dipping to its lowest levels in five years. However the four countries still accounted for more than 55% of the $23.86 billion invested in emerging markets in 2013.
2.Fundraising for emerging markets focused funds dropped 19% to $36.43 billion, the lowest level since 2010. Poland, Mexico and Peru were among the few countries able to buck the trend by raising more capital in 2013 than in 2012. The overall market share of emerging markets-focused funds dropped to 12% of total global fundraising from 21% in 2012.
3.Emerging Asia continued to command the bulk of the $23.86 billion invested in emerging markets during 2013, despite a nearly 8% drop in the amount of capital invested in China. Investment in Sub-Saharan Africa jumped 43% to a five-year high of $1.6 billion, while the Middle East and North Africa, which enjoyed a brief boom of investment activity in 2012, made up less than 1% of the overall deal volume in 2013.
4.Although Brazil continues to attract the largest amount of capital invested in Latin America, high prices and a slowdown in the nation’s economy have driven investors further afield. Brazil accounted for the lowest percentage of capital invested in Latin America since 2010, dropping to roughly 65% of total private equity investment in the region from about 84% in 2012. Instead, investors steered more capital into the Andean countries, namely Chile and Colombia, each of which accounted for more than 10% of private equity investment in the region, up from less than 5% each in 2012. Meanwhile, Mexico captured a little more than 9% of capital invested in Latin America, up from nearly 3% in 2012. The country was also home to one of the top ten largest buyouts among emerging markets, Axis Capital’s $200 million buyout of Oro Negro.
5.In spite of a drop in the number of deals, invested capital and fundraising year over year, emerging markets still accounted for 10% of private equity investment globally during 2013, a percentage that has held fairly steady during the past five years.
Increases in the amount of capital deployed to regions including Sub-Saharan Africa and Southeast Asia are strong indicators that PE investors are continuing to see opportunity in all corners of the globe.
Source: WSJ
