Private Equity in Developing Countries

I don't see why more firms don't try to set up offices in developing countries. I am not talking about BRIC. More along the lines of Central and South America, the Middle East, the Caribbean, and others. I'd think that there would be less competition for deals here. The offices could be run by mostly graduates of that nation's universities. Maybe the deals would not be that big, but an experienced group should not have travel supporting themselves if they are a small boutique focusing in this "international business."

Any thoughts?

Just thought it was interesting.

Comments (12)

 
Jan 31, 2010 - 5:50pm

I think there are a lot of geopolitical issues with some of those countries. Plus, the deals might be too small to bother with. If you are interested I would search for firms heavy into microfinance.

 
Jan 31, 2010 - 5:57pm

I thought of deals being too small. But I think as countries like BRIC progress and more focus is on them and the countries that are already well-developed. More deals will appear in the countries I previously mentioned and anyone who already is there will profit from it.

and to riverraver-
A few years and I will still be in college, I am in high school.
I am not saying I am planning on doing this exactly.
Just thought it is an interesting conversation about an idea.

Any more opinions?

 
Jan 31, 2010 - 6:30pm

There are lots of firms that focus on the MENA region already. I agree that Latin American and South America are largely untapped area, but that's for a reason. Without sound infrastructure or a stable government, it is really risky to make the investment. Additionally, you have far less liquidity due to the lack of M&A activity in the region.

CompBanker

 
Jan 31, 2010 - 7:24pm

-Compbanker

You are right, I have seen many more in MENA than S. America.

I think it is possible to do this in Latin America and even more in the future. But so far I have only seen Cloud Break Ventures LLC.

The microfinance firms seem more effective. Their reach is also much greater. Microfinance is kind of like PE, but on a different scale. Am I right?

 
Feb 2, 2010 - 9:17am

I think PE in emerging markets is a different sport than classic PE.
You need people with additional skills including operational experience, culural background, etc...
you must look at a lot more risks and market events than in developped economies but in my view it's the most interesting aspect of PE though maybe not the most fun, lucrative, etc...You will certainly do a lot less deals but it will be a lot more complex.

A few years back it was the same situation in IBD when you were looking at NYC vs. Hong Kong. By going to HK you had a much smaller team, at the same time you had a wide number of potential clients since you were not specialized in a specific industry and usually covering all south east asia but at the same time you had no recurring established clients because of the lack of activity, overall you had smaller deal size and a lot less deals too but at the end there were a lot more challenges and diversity in the work...

 
Feb 2, 2010 - 10:09am

I work at a PE firm that only invests in SA. Antmavel is right, there are not a ton of deals- well not a ton of deals we pursue. We follow very strict guidelines for expected returns, governance, country/location in a country, etc...

Since the risk is greater we look for deals with much higher projected IRR than typical PE in developed markets. The firm is very international, everyone speaks several languages, went to high school in a non-US country, some did undergrad abroad, but all received their MBA from Wharton/HBS (I am the token American in the firm). It's really interesting to predict how the growth of a certain industry (mainly anything infrastructure related) may follow/stray from historical trends in developed markets.

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