Deal professionals are enticed by Latin America like never before. An emerging middle class with increasing purchase power, coupled with a lack of intermediary services for buyers and sellers, has lit a fire under investment banks and law firms to start branching out and developing talent across the region.
“It’s what is necessary now,” says Maria-Leticia Ossa-Daza, a partner with Willkie Farr & Gallagher. “Having a Latin American component or a practice with lawyers who speak other languages and are culturally-aware is critical in today’s international market.”
There has also been a clear upswing in investment banks and private equity firms looking to hire in South America-41.1 percent in the first quarter of 2014, up from 31 percent in the first quarter of 2013, according to Private Equity Headhunters.com LLC, a Carlsbad, California-based recruiting firm.
“That’s a pretty significant increase,” says chief executive C.R. Nicholas, adding that there are roughly 700 private equity groups across the globe signed up to Private Equity Headhunters.
Private equity sponsors remain eager to execute buyout plans in Latin America, while strategic buyers are warming up as well. These days, they are openly seeking greater exposure to not only Brazil, Latin America’s largest economy, but also Columbia, Peru, Venezuela and Mexico. There is a significant opportunity in each locale to ink deals in several sectors, including consumer goods, energy, infrastructure and telecom.
There are plenty of factors currently setting the stage for some attractive investment opportunities, says Duncan Littlejohn (pictured), a partner at StepStone Group LP who, beginning in May, will launch the investment firm’s Latin American office in São Paulo. StepStone, headquartered in New York, tapped Littlejohn, along with vice president Bruna Riotto, from Paul Capital, a San Francisco-based private equity investment firm made up of a fund of funds.
“Five years ago it was fairly easy to cover the region from New York or London,” Littlejohn says. Not anymore. Within that time, the number of PE managers in countries such as Brazil and Mexico tripled, and it became a much more complex playing field, he explains.
Part of the reason why dealmakers are growing their teams in the region is because there is a general need for advisers, too. While the U.S. is a highly intermediated market, inking a transaction in Latin America depends more on the fruits of your relationships, Littlejohn says.
“The Latin American market is still much less intermediated. Investment banks generally stick to much larger deals but in the middle market, deals are generally proprietary,” he adds. “The sellers are less sophisticated than their counterparts in the U.S.”
As a result, investment banks and law firms are actively hunting for the top movers and shakers that can help them source deals and zero in on companies that are in play.
Willkie Farr & Gallagher, for example, is currently growing its Latin American practice, according to Ossa-Daza.
“I really wanted to do more in Latin America,” says Ossa-Daza, a native Colombian who began her career as an associate in Willkie’s Paris office.
Earlier this year, the New York firm placed Ossa-Daza, who most recently advised on Maurel et Prom’s $66 million acquisition of Caroil SAS from Tuscany International Drilling in November 2013, at the helm of the Latin American unit in an effort to bolster its presence in the region. Her past experience also includes representing Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) in a joint venture with Proctor & Gamble Co. (NYSE: PG) to combine their over-the-counter consumer health care businesses in Latin America.
“I speak Portuguese and Spanish too, and thought there are definitely more opportunities that we could explore there.”
Ossa-Daza notes that Willkie Farr & Gallagher began taking Latin America more seriously when it noticed more private equity deals springing up in 2011, 2012 and 2013.
“We see our U.S. and European clients more and more interested in Latin America and also Latin American clients and companies going abroad,” she adds. “We are involved in these transactions and want to increase our participation.”
Willkie Farr & Gallagher isn’t the only law firm looking to extend its reach across Latin America. Some law firms are snagging top advisers who, concurrently, bring entire teams with them from rival firms.
“It’s a market that is ripe for development,” says Holland & Knight partner David Whitestone. The Miami-based law firm has been busy hiring across Latin America over the last several months, seeking attorneys with expertise in Mexico.
While Holland & Knight originally operated in the country in 1998 through a joint venture with Mexican firm Gallástegui y Lozano SC, it looked to set up a shop of its own once the joint venture ended. The firm then started searching for advisers with the expertise it needed, Whitestone explains, using headhunters to identify lawyers in the marketplace that possess the skillset it needs.
The firm’s Mexico office took off when Holland & Knight tapped Boris Otto in late 2013. He joined Holland & Knight from rival law firm Chadbourne & Parke and brought with him an entire slate of attorneys, including partners Alejandro Landa Thierry and José Antonio Prado, in addition to two counsels, Miriam Grunstein and Leslie Palma. A group of four associates also jumped over from Chadbourne & Parke. They include: Mariza Atiyeh, José Carrillo, Carla García and Carlos Ochoa. Another associate, Maria de los Ángeles Serna, was hired independently.
In February, a number of attorneys jumped to Holland & Knight again, only this time from DLA Piper. Guillermo Uribe Lara joined Holland & Knight’s Mexico City office as a corporate finance partner. Uribe previously served as director of corporation finance and director of market surveillance of the Mexican National Banking and Securities Commission. Joining him on the move were associates Adrian Gay Lasa, Jorge Gonzalez, Mirna Ordaz and paralegal Santiago Soldevilla.
Just as Holland & Knight welcomed large teams from other law firms, investment banks are looking to recruit as well.
Such was the case with Moelis & Co. The New York advisory firm recently announced the launch of a Latin American office in its own right.
In the midst of planning an initial public offering, Moelis ramped up its hiring activity in March when it opened a Sao Paulo office-marking the firm’s first expansion into Brazil. Otavio Guazzelli and Jorio Salgado-Gama were named co-heads of investment banking for the country, while Erick Alberti was brought on as a partner.
The move comes at the expense of BR Partners, which is where each of the bankers were stationed before making the jump to Moelis.
Guazzelli was head of investment banking at BR Partners and, before that, co-head of investment banking for Citigroup Brazil. Salgado-Gama led the mergers and acquisitions team at BR Partners, while Alberti served as a partner.
Perhaps the most active bank enlisting talent is São Paulo-based Itau BBA. The investment banking arm of Itau Unibanco Holding SA, which ran the $862 million sale of healthcare company Notre Dame Intermedica SA to Bain Capital in March, has also been vocal about its desire to expand operations in Latin America. Right now, it has offices in New York, London, Hong Kong, Tokyo and Dubai, but just one office in Brazil.
In December, Itau BBA President Candido Bracher cited signs that Brazil’s government-run banks will scale back their business lending in 2014, allowing more space to private investment banks such as Itau BBA to prosper. The bank also announced that it would be expanding existing operations in Peru, Colombia and Mexico.
In the case of Mexico, the bank recently obtained a brokerage license and is slated to begin operating as a brokerage in 2014. According to public statements from the company, Itau plans to have as many as 50 employees in Mexico within the next two years with units throughout Latin America to serve global companies operating in the region. So far, some of the notable hires include Javier Grana, previously at Morgan Stanley (NYSE: MS) to oversee mergers and acquisitions in Latin America, and Marcel Patino, formerly the head of corporate and investment banking for Citigroup Inc.’s (NYSE: C) Colombia business, to lead investment banking.
Private equity firms are ramping up with Latin American experts as well.
Washington, D.C.-based Darby Private Equity hired Erik Bethel as a managing director in April. The newly created position will be a part of the firm’s Latin American segment, which is led by Roberto Velarde. Bethel heads over from SinoLatin Captial, a Shanghai-based company focused on natural resources and flows between Latin America and China which he co-founded. Based in Miami, Bethel’s focus is on opportunities within natural resources.
Over the past year, Greenwich, Connecticut-based investment firm Gramercy announced several hires to its newly formed Latin America private equity investment team. They include managing directors Gustavo Ferraro and David Britts, who are leading a group of six PE execs: Javier Ledesma-Arocena, Carlos Anderson, Roberto Colliard and Lorenzo Souza.
With so many legal advisers and investment bankers on a hiring spree, and PE investors displaying confidence in emerging markets’ prospects, it is clear that each firm is eager to pitch their tents across the broader Latin America region.
“I think it’s becoming increasingly clear that institutional investors can’t ignore the Latin American story,” Littlejohn says. “The genie is out of the bottle and it’s not going back in.”