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EQUITY: Private Equity Lurches

May 1, 2009

Months after the public markets shut down for issuers, some private equity (PE) shops say they are seeing a generalized decline in activity.

Selective distress in the corporate sector has done little for valuations, and buyers of all kinds – strategic M&A and financial sponsors – are wary of quality and unsure about timing acquisitions. Shuttered debt markets have meanwhile laid dormant Brazil’s budding LBO trend, which started in 2006 with the availability of cheap local and cross border bank debt.

“Things have quieted down a lot on our end,” Antonio Bonchristiano, co-CEO of GP Investments tells LatinFinance, referring to new acquisitions. He says his shop has been looking at select distressed situations in Brazil, but few look attractive. GP was heard assessing SantelisaVale with measured interest. Louis Dreyfus won negotiation rights with the debt-laden sugar producer and an announcement has yet to be made.

Among barriers to new acquisitions is a significant divergence in valuation expectations. “There’s a big valuation gap,” says Bonchristiano. The investor acknowledges a...

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