Private Equity’s Driven Deal Display
The Emerging Markets Private Equity Association reported that Q3 fundraising through 120 sponsors had returned to the pre-Lehman level year to date at over $30 billion, a $10 billion jump over all of 2010. China-focused offerings took three-quarters of the total, while Brazilian ones took a record $4.5 billion. 650 transactions over the period came to $20 billion, and the developing market fraction of the global total is 15 percent. With Europe’s crisis, capital mobilized has dropped under $1 billion there, with only $60 million put into Russia. Sub-Sahara Africa has drawn more at $1.3 billion, quadruple the MENA region attracting $350 million, down one-third from last year. South Africa in turn has taken in just $100 million, one-quarter 2010’s commitment. Asia accounts for the most deal-making with 75 percent of the aggregate, although its activity is less than 10 percent the worldwide sum. China and India dominate, but PE investment as a share of GDP is 0.15 percent and 0.4 percent, respectively. India’s penetration is the highest among major economies, while Mexico’s and Turkey’s rank at the bottom. Turkish companies’ leverage has been a deterrent, with $60 billion in overseas loans due through the middle of 2012, according to the central bank. For the biggest emerging market corporates generally, record international bond payments of $55 billion are owed and recent exchange rate corrections could aggravate the burden.
In Central and Eastern Europe limited partnerships have begun scouting for openings with the likely pullback of Eurozone-based cross-border groups which comprise at least two-thirds of the system in Hungary, Poland, Bulgaria and elsewhere. Originally they had agreed as an extension of EBRD, EU and IMF support to keep their presence and portfolios essentially intact, but parents like Austria’s Erste now clearly intend to repudiate the pledge under earnings and Basel and European supervisor capital-raising goals. The fallout may extend to Spanish giants BBVA and Santander’s operations in Brazil, Chile, Mexico and Argentina. Last year a Brazilian unit IPO had been oversubscribed, but the stock market index and flotation pipeline have since cooled. Euro area bank claims there are almost one-quarter of domestic credit and household debt service levels merit comparisons with the US in the subprime heyday. Number one target China has also come under harsh banking criticism in its first IMF stability assessment as venture firms weigh economic, property, and local government risks. It questioned the oversight and performance of the state-owned commercial behemoths, and cited the system danger of multiple shocks that could include a sudden exchange rate shift which may again be in the startup phase with bilateral and WTO complaints.
