MEXICO

34 | SPECIAL REPORT: PRIVATE EQUITY IN MEXICO
International companies are also attracted to Mexico because of its
appealing demographics and consistent economic growth. However,
international firms sometimes find Mexico difficult to penetrate on
their own. Private equity can therefore play a vital—and potentially
profitable—role by acquiring and consolidating the smaller, often
family-owned companies that make up much of Mexico’s economy.
As PineBridge Investments’ Rodriguez explains, “Some managers
are putting together consolidation plays of small businesses in
fragmented markets and really making them a plug-and-play for
an international firm that perhaps could see the attractiveness of
the Mexican market for their specific sector. They can’t come and
do all that work and buy a small company in Monterrey for US$5
million and then another one in Guadalajara. Some fund managers
are doing that work so that an international player can come in
and gain access to the market.”
Private equity then serves as a valuable tool for these international
companies to filter, consolidate and professionalize potential
acquisitions in Mexico. As EMX Capital’s Ávila puts it, “It gives
foreign companies a tremendous amount of relief to come to
Mexico after a good private equity firm has done its job. We have
the proper documentation and compliance in place, so they know
what they’re buying.”
Global firms, however, are not the only ones buying private equity-backed
companies in Mexico. A number of industry participants
interviewed during the course of researching this publication
commented on the growing prevalence of domestic companies
in Mexico becoming potential buyers. One example of a strong
homegrown company is Mexico’s own Grupo Bimbo, which has
transformed from a small domestic operation into the largest
baked goods company in the world, acquiring both Mexican and
international companies along the way. As Mexico continues to
develop its own international juggernauts, strategic acquisitions
from private equity fund managers could be a primary source of
fuel for these companies’ growth. Fund managers in Mexico stand
to benefit from the continued development of strong companies
headquartered closer to home.
IPOs
Exits via public offerings have played a smaller role in most firms’
exit strategies in Mexico. While there were six initial public offerings
on Mexico’s Bolsa Mexicana de Valores (BMV) in 2015, none of
them were backed by a private equity investor. However, Southern
Cross Group raised MXN1.8 billion (US$101 million) for its home
construction supply company Javer through an IPO on the BMV in
January 2016, suggesting that a local IPO market for companies
seeking an issuance of under US$250 million is emerging (see
Sidebar: The Promise of a Local IPO Market in Mexico).
Nexxus Capital is an example of a firm in Mexico that has listed
multiple companies on the BMV, having completed four IPOs since
2008. The firm most recently listed a company in 2014, raising
MXN750 million (US$57 million) for its portfolio company Grupo
Hotelero Santa Fe in a primary offering. Nexxus Capital’s Terrazas
explains his firm’s strategy regarding IPOs as not necessarily being
an exit on day one. “In all cases, we have maintained a significant
portion of our ownership in the company, even after the IPO. We
see it as another round of financing in order to continue giving
value to the company.”