Leading legal and banking talent attended Latin Lawyer′s second annual private equity conference in New York yesterday chaired by Simpson Thacher & Bartlett LLP′s Todd Crider, which saw prominent lawyers and bankers discuss the latest challenges and opportunities for private equity in Latin America, with a keynote speech on the world′s ongoing financial woes from Roger Altman of Evercore Partners.Crider began the day on an optimistic note with a banking panel in which Nicolas Aguzin, CEO for JP Morgan Latin America, estimated that funds raised for the region in 2011 could reach as much as US$15 billion - on top of US$8 billion last year. He remarked on the enormous market activity such significant sums would generate.At the moment Aguzin estimates three quarters of private equity investment in Latin America is made in Brazil, but he predicts that figure will fall to 50 per cent as investors take their second steps elsewhere in the region.Enrique Bascur of Citigroup Venture Capital International said his fund has invested elsewhere since the early 1990s and has had a number of successful exits in Chile, Peru and Colombia. The panel agreed the most favoured sectors in the region are consumer and retail (driven by the rise in disposable income), infrastructure and energy and natural resources, which have experienced fast growth thanks to China and India investing.Crider turned to the value of private equity deals - which has risen to close to US$1 billion in some cases from less than US$100 million. Apax Partner′s investment in Tivit, worth US$950 million, was used as an example, although the group′s Ashish Karandikar said deals of this value wouldn′t necessarily be a regular occurrence for the fund.Not surprisingly the panel touched on the ongoing volatility in the European markets and its impact on Latin America. Juan Carlos Garcia of Quadrant Capital Advisors sees regional and local banks occupying the space left by those European banks forced to divest assets after the banking crisis two years ago.The importance of leverage was also discussed, and Bascur thought that, unlike the US, in Latin America deals were done ′the old fashioned way′ - bringing in management to improve a company′s performance before selling it on. Karandikar added that a surge in leveraged buyouts was unlikely.Deal technologySergio Galvis of Sullivan & Cromwell LLP led the second panel, which dealt with the structuring of public M&As in the region. He and panel members compared deal technology in Brazil, Colombia and Mexico, beginning with non disclosure agreements (NDAs) and asking at what point companies are required to disclose mergers.Jean Michel Enriquez, from Creel, García-Cuéllar, Aiza y Enríquez, SC, used the merger between Banorte and Ixe to illustrate the Mexican scenario; the banks had to reveal they had signed a confidentiality agreement, but not what it was about. Gómez-Pinzón Zuleta Abogados SA′s Alejandro Linares said the topic is subject to an ongoing discussion in Colombia, with questions being asked such as: is opening a data room a disclosable event? Meanwhile Jose Luiz Homem de Mello of Pinheiro Neto Advogados said that disclosure is a sensitive issue in Brazil and the regulator is not comfortable receiving confidentiality requests.Galvis asked the lawyers about the requirements of board members if unsolicited offers arise during the negotiations for NDAs. In Brazil, Mello used the example of a deal that had already been set up when a new bidder came with a higher price. What is the duty of the board, he asked. In the end the company renegotiated a higher price with the initial bidder in its duty to look after shareholders. Linares said that in Colombia, if you give one bidder access to company information, you have to give all other interested parties equal treatment.The discussions moved on to fundraising structures and the regulatory outlook, in a panel moderated by Glenn Sarno, also of Simpson Thacher. Ritch Mueller SC′s Luis Nicolau kicked started the topic with a look at a major development in Mexico′s investment environment: new rules allowing pension funds to invest in private equity, through the so-called CKDs. He referred to US$4 billion being raised in Mexico, mostly because pension funds can now allocate 15 per cent of their assets to that area. In Brazil meanwhile fundraising continues apace, and Daniel Miranda of Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados identified new trends for the country: investors are more selective since the financial crisis and looking for a track record in fund raising. Furthermore, offshore funds are investing in local funds to get local expertise - Blackstone buying into Patria for example. Morales & Besa′s Guillermo Morales painted quite a different picture in Chile where there is an abundance of liquidity, yet due to ′regulatory mismatches and tax issues′ there has been reluctance among pension funds to invest locally.The panel discussed how to integrate local and international investors. As Sarno said, marrying offshore and onshore investors creates tension and requires careful planning. Lawyers must anticipate these glitches, he said. The tension is largely down to the liberalisation of pension funds. For example in Brazil they can dictate what a fund can invest in, while in Mexico they might demand a fund manager remains in office for the duration of a fund′s lift time. But in Chile, Morales again noted their risk adversity, which he personally puts down to a lack of knowledge at management level. (In contrast Dutch or Canadian funds have a dedicated team of staff, Sarno noted.)Sarno finished up the panel with a look at the impact of the Dodd Frank Act on the region. He said the two biggest effects are its regulatory requirements and the Volcker rules. He described the act as a big sea change and highlighted the extra territorial application of SEC rules. He also touched on the available exemptions. Nicolau said the ′complex rules and severe penalties′ dissuaded people from going to the US.A 50-50 chance of falling back into recession Roger Altman, chairman of Evercore Partners, was the keynote speaker at the conference. He chose a topic that was evolving as the day went on: ′the very fragile and dangerous economic and financial conditions which confront the US and Europe at the moment′. Altman described the unfolding events as historic and of global consequence.He said there have only been two previous financial crises in the West in the last century that have induced the economic contraction we are seeing now. The first was in the 1930s - the great crash leading to the great depression. The second was the credit market collapse just three years ago, which resulted in the banking crisis, the recession and today′s uncertain situation. The aftermath of such recessions is long, very painful and comes with sub optimal levels of growth and employment, he said.Altman considered the situation in Europe. In his view history will not look kindly on the response to the 2008 crisis from European governments and monetary authorities, which he called ′slow, hesitant, and small′ and led to today′s ′full blown′ sovereign debt crisis. What needs to happen now, he said, is the enlargement of the European Financial Stability Facility, so it can lend to countries such as Italy and Spain, and the attribution of greater powers to the European Central Bank.Turning to the US, he said the aftermath would be prolonged, with the two main obstacles being the household balance sheet and a clogged financial system. Households have reigned in spending and are concentrating on paying down debt, while banks don′t want to lend for fear of making the same mistakes the economy is still struggling to recover from.He put the chances of Europe and the US falling back into recession at 50-50.The implication for private equity, Altman said, was that financing investment would be very difficult.Following the keynote speech, Skadden, Arps, Slate, Meagher & Flom LLP′s Paul Schnell returned to a more optimistic view with a panel on the upcoming trends in private equity.Flavio Meyer of Machado, Meyer, Sendacz e Opice Advogados began by listing some impressive figures for M&A in Brazil, and pointed out that 60 per cent of all private equity deals last year were made with Brazilian funds. With Bovespa quieter than in 2006 it′s a good time for private equity, he said, and companies are looking for the corporate governance and financing policies that private equity brings.Giving the Mexican perspective, Solórzano-Carvajal-González-Pérez-Correa′s Luis Gonzalez noted that there has been no slowdown in private equity there and said 80 per cent goes to real estate and infrastructure, while in Chile even though the value of private equity is smaller in comparison, the market is active with the most institutional investors being insurance companies, according to Francisco Ugarte of Carey y Cía.In terms of the main players in the region, Gonzalez spoke of evolution in Mexico - from the domination of US players flying in and out (and burning out), to them setting up on the ground and local players establishing themselves, and the Mexican market subsequently growing.Simpson Thacher′s Wilson Neely said international players are looking to the region ′with lust in their hearts.′ He remarked on their diversity: the players with dedicated Latin American funds, like Carlyle and Advent; hedge funds such as Tiger; and industry specialised funds. He said there are more realisable opportunities in this region than in Asia.Schnell asked the panel how much leverage they see in deals. In Chile they are mainly equity driven, said Ugarte, and in Brazil Meyer said local private equity funds turn to local equity. Schnell concluded the panel by saying he though more leverage was inevitable because of the fees investment banks can attach to it.Private equity case studyA slightly different >The target countries were Argentina, represented by Marcelo Etchebarne of Cabanellas, Etchebarne, Kelly & Dell′Oro Maini Abogados, Brazil, with Veirano Advogados′ Carlos Alexandre Lobo making the case, and Peru, whose framework was explained by Alberto Rebaza, of Rebaza, Alcázar & De Las Casas Abogados Financieros.Levi-Minzi asked them to explain the relevant legal and regulatory framework in their respective countries. He also asked what the key elements of due diligence would be. In Peru, Rebaza said they would have to pay attention to the new consultation law which requires companies to consult native communities affected by a project. In Brazil, environmental issues are critical according to Lobo, while in Argentina the company would have to carry out due diligence of the ultimate buyer of the gas, said Etchebarne. They were also asked about local financing options. In Brazil BNDES could offer low cost financing as infrastructure and energy are on the government agenda explained Lobo; Rebaza pointed out that the Camisea consortium had placed to bonds for its pipeline in Peru, while in Argentina, Etchebarne said there was a small local capital market.Shearman & Sterling LLP′s Antonia Stolper led the final panel of the day, which centred on balance sheet management and exits. The head of investment banking in Brazil for Goldman Sachs, Daniel Wainstein, told the audience that private equity activity in Brazil is ′booming′ and there is a sentiment that if a private equity fund isn′t investing there, ′it′s wasting its time.′ He said Brazil would see more than 200 IPOs in the next few years, and noted the high level of interest in the country′s companies from strategic buyers.Stolper asked Wainstein if private equity firms were likely to buy minority stakes in view of corporate governance. He said family planned businesses hold the power now; they have good management and don′t need to sell a majority stake. They agreed that in Brazil growth is so fast that deals don′t need to be leveraged.Joaquim Oliveira of Souza, Cescon, Barrieu & Flesch Advogados went on to discuss the mechanisms of an exit strategy. He said the negotiations have become increasingly complex and advised private equity groups to set out exits in the terms and conditions of an agreement. Barros & Errázuriz Abogados′s Pablo Guerrero said that exit strategies present challenges for Chilean lawyers; for example the obligation to go public depends on the liquidity of the markets. Guerrero referred to the recent scandal involving La Polar. The retail group had been a private equity success story, with the investor taking it from bankruptcy to an IPO. But now it is embroiled in accusations that the board had been cooking to books for some time and has triggered a discussion about corporate governance.Bruchou, Fernández Madero & Lombardi′s Enrique Bruchou concluded the day asking why Argentina has so far been overlooked as a destination for private equity, and argued that this is the right time for investment in the country as its assets are undervalued and the country has the necessary fundamentals, such as advanced bankruptcy protection and international accounting standards.Crider drew the conference to a close with a positive thought: private equity is just beginning in Latin America, meaning the opportunities for lawyers are enormous.(Latin Lawyer 23.09.2011)(Notícia na Íntegra)