Valinvest: Peruvian M&A activity to remain strong in mass consumption, financial services, agro-industry

Source: DealWatch
December 23, 2009

Peru
Valinvest: Peruvian M&A activity to remain strong in mass consumption, financial services, agro-industry
Peru has become a highly attractive destination in Latin America for investments, especially in the area of M&A activity, due to a range of factors, such as the strength of the economy and the low price of assets, Mauricio Grieve, funds executive at local investment management firm Valinvest, told DealWatch.

“The crisis has not affected all countries and all sectors in the same way,” Grieve said. He explained that Peru's growing popularity among investors “has occurred due to greater economic growth expectations and many [M&A deals] that have taken place have been related to strategic consolidation in various sectors with the opportunity of buying cheaply.”

Grieve added that M&A investments could prove to be an interesting growth strategy due to the fact that the most important companies in each economic sector “will try to continue the market consolidation,” and there will also be “funds for acquisitions of companies from investment funds.”

The sectors in which the greatest M&A activity is expected to be seen are linked to mass consumption (food and beverages), financial services, where various significant deals have already taken place this year, and agro-industry, said Grieve. He also pointed out that some investors were taking advantage of the low prices to make investments in the mining industry.

The funds executive explained that economic stability and growth of countries as a whole were fundamental factors in attracting investments, which meant that aside from Peru, Colombia, Brazil and Chile would also be popular among private equity funds.

“In terms of private equity, Peru is still a small market that is on the up because of the attractiveness of its expanding economy and much improved regulatory framework,” Grieve added.

At national level, the measures implemented in recent times by the Peruvian securities and exchange commission (Conasev) have been beneficial. “The new legal framework is reducing costs and red tape, improving investment conditions and protecting the investor,” he explained.

“The reforms are related to the constitution and placement of investment quotas on investment companies. The private investment funds will have to report the value of their equity and the information requirements for the [investment fund management companies] SAFI that only offer provide certificates of participation privately and as a consequence they are not regulated by Conasev,” the executive said. “The creation of investment funds has been made more flexible,” he summarized.

Valinvest currently manages a venture capital fund that has existed for 10 years. Through this fund investments have been made in agro-industry, exports, natural resources, industry, technology and media.

“Apart from this fund, we've created another private capital fund that's in the first stage of operation. This is a fund to trade securities that will be offered to the capital market as alternative short-term investments,” Grieve said.

The Valinvest executive confirmed that divestment has begun in one of the firm's venture capital funds and that some of the sales to be made would be settled by mid-2010 and would be reported to the market.

Valinvest is also putting together a second venture capital fund and is hoping to raise more than USD 60mn. This would start operations towards the end of next year, Grieve explained.

“The participating investors have actually not yet committed any capital to the venture capital fund, which is in the process of being structured. The capital will be private and [the fund] will basically be aimed at both domestic and foreign institutional investors.”

Valinvest expects to use the money in this fund to invest in the sectors of natural resources, agro-industry-exports and mining. “However, we haven't ruled out certain retail companies that have significant growth potential in the local market. We're receiving projects from various sectors and we're studying these to include them in our portfolio,” stated Grieve.