U.S. Private Equity Funds Remain Confident In LatAM.

U.S. private equity investors are confident that the overall economic performance of Latin America in 2001 will be positive, citing Brazil (44%) and Mexico (22%) as their two most popular investment destinations for the next twelve months, according to the fourth annual survey of U.S.-based private equity funds by PricewaterhouseCoopers’ Latin America Business Center (LABC). The survey participants include some of the largest U.S. private equity funds with active investments in Latin America.

Eduardo Pupo, managing partner of the New York-based Latin America Business Center, said, “Even though Latin America faced another challenging year in 2000, U.S. private equity investors remain committed to the region. Brazil, Mexico and Argentina will continue to attract experienced U.S. investors who know where the opportunities are and how to get the deals done.”

Other key survey findings include:

– Return on investments in Latin America last year met the expectations of the majority (67%) of the funds responding. The remaining one-third of those surveyed (33%) cited economic changes, post deal integration, competition and other factors as main reasons why their projections were not met.

– In 2001, the entertainment/media/communications/information technology sector (29%) will be the most active for U.S.
private equity investment. The financial services sector (25%) will be the second most active sector for investments planned in 2001, followed by the energy (8%), retail (4%) and consumer products (4%) sectors.

– U.S. investors intend to exit their current and/or future investments by selling to a strategic buyer. The majority
(60%), ranking strategic buyers as their most preferred exit strategy, want to sell to a global strategic buyer while the
remainder (40%) would rather sell to a domestic strategic buyer. International IPOs were preferred over domestic IPOs by
the survey respondents.

– Economic stability, political stability and quality of the workforce are the issues of greatest importance when analyzing a country for investment purposes. This has changed slightly from those surveyed in 2000, who cited foreign investor treatment, not the labor market, as a critical issue.

– When analyzing a company for investment opportunities, quality of management, viability of business proposition and strategy, and quality of and accessibility to information are the issues of greatest importance.

– Price expectation is the number one impediment to closing a deal. Other deal-breakers include absence of a strong
management team, followed by acceptability of business practices and the seller’s desire for majority control.

“The region holds promise for U.S. investors,” said Aldemar Toledo, New York-based PricewaterhouseCoopers partner, Transaction Services group. “The key is knowing where to go, with whom to partner and how to structure the best deal. While this requires significant country, industry and transaction expertise, deals are getting done and investors continue to investigate new opportunities.”

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