PRIVATE EQUITY in MEXICO 2 | SPECIAL REPORT: PRIVATE EQUITY in MEXICO About EMPEA EMPEA’S Board of Directors
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MAY 2016 SPECIAL REPORT: PRIVATE EQUITY IN MEXICO 2 | SPECIAL REPORT: PRIVATE EQUITY IN MEXICO About EMPEA EMPEA’s Board of Directors EMPEA is the global industry association for private capital in emerging markets. Robert Petty (Chairman) We are an independent non-profit organization with over 300 member firms, comprising Managing Partner & Co-Founder, Clearwater Capital Partners institutional investors, fund managers and industry advisors, who together manage more Teresa Barger (Vice Chair) than US$1 trillion of assets and have offices in more than 100 countries across the globe. Senior Managing Director, Cartica Management, LLC Our members share EMPEA’s belief that private capital is a highly suited investment strategy in emerging markets, delivering attractive long-term investment returns and Rebecca Xu (Vice Chair) promoting the sustainable growth of companies and economies. We support our Co-Founder & Managing Director, Asia Alternatives Management LLC members through global authoritative intelligence, conferences, networking, Mark Kenderdine-Davies (Secretary) education and advocacy. General Counsel, CDC Group plc Thomas C. Barry President & Chief Executive Officer, Zephyr Management, L.P. About EMPEA Consulting Services Fernando Borges EMPEA Consulting Services provides high-quality, bespoke research on private capital Managing Director & Co-Head of the South America Buyout Group, in emerging markets. Through custom research, white papers, syndicated reports and The Carlyle Group case studies, EMPEA Consulting Services helps firms acquire actionable insights, Michael Calvey communicate their stories and share their successes to grow their businesses. EMPEA Founder & Senior Partner, Baring Vostok Capital Partners Members receive priority service and discounted pricing. For more information, or to Paul Fletcher begin a project today, please contact [email protected]. Chairman, Actis Koenraad Foulon Senior Managing Partner & Investment Committee Chairman, Capital Project Team Group Private Markets Maria C. Kozloski Nadiya Satyamurthy, Senior Director, Consulting Services Chief Investment Officer, International Finance Corporation (IFC) Mike Casey, Senior Director, Consulting Services Tope Lawani Co-founder & Managing Partner, Helios Investment Partners Luke Moderhack, Senior Research Analyst Roger Leeds Jamie Farrell, Consulting Services Fellow Professor, Johns Hopkins University, SAIS H. Jeffrey Leonard President & Chief Executive Officer, Global Environment Fund Guest Contributors Piero Minardi María Ariza, CEO, AMEXCAP Managing Director, Warburg Pincus Sanjay Nayar Mauricio Basila, Partner, Basila Abogados, S.C. Member & Head, KKR India Advisors Pvt. Ltd. Eduardo Flores Herrera, Vice President for Market Supervision, Comisión Nacional Ziad Oueslati Bancaria y de Valores (CNBV) Founding Partner, AfricInvest Scott McDonough, Managing Director, Alta Growth Capital Nicolas Rohatyn Chief Executive Officer & Chief Investment Officer, The Rohatyn Group César Pérez Barnés, Partner, Southern Cross Group Jean Eric Salata Alejandro Rodriguez, Director, Private Funds Group, PineBridge Investments Chief Executive & Founding Partner, Baring Private Equity Asia Gregorio Schneider, Managing Partner & Chief Investment Officer, TC Latin America Partners Mani Saluja Partner & Co-Head, Emerging Markets Private Equity, Quilvest Group Dr. Felipe Vilá González, Director General, Fondo de Fondos George W. Siguler Managing Director & Founding Partner, Siguler Guff & Company Tom Speechley Production Assistance Partner, The Abraaj Group & Chief Executive Officer, The Abraaj Group (North America) Ben Pierce, Pierce Designers Yichen Zhang Chairman & Chief Executive Officer, CITIC Capital To learn more about EMPEA or to request 1077 30th Street NW • Suite 100 • Washington, DC 20007 USA a membership application, please send an Phone: +1.202.333.8171 • Fax: +1.202.333.3162 • Web: empea.org email to [email protected]. EMPEA • MAY 2016 | 1 SPECIAL REPORT: Private Equity in Mexico Contents Acknowledgements ................................................................................................................................ 2 A Letter from EMPEA Consulting Services .............................................................................................. 3 An Introduction to Private Equity in Mexico .......................................................................................... 4 Sidebar: Where Does Mexico Fit Within a Global Emerging Market Allocation? by Alejandro Rodriguez, Director, Private Funds Group, PineBridge Investments ....................................................7 Mexico’s Macroeconomic Environment—A Bright Spot in Latin America ............................................. 8 Spotlight: The Depreciating Peso ..............................................................................................................................9 Sidebar: Taking Stock of Mexico’s Private Equity Industry—The Local Association View by María Ariza, CEO, AMEXCAP ...............................................................................................................................12 A Closer Look at Mexico’s Fundraising Environment ............................................................................13 Spotlight: LP Perspectives on Mexico ......................................................................................................................18 Sidebar: Building a Local Industry—The Role of Fondo de Fondos in Mexico’s Private Equity Ecosystem by Felipe Vilá González, Director General, Fondo de Fondos ..................................................................................19 The Legal & Regulatory View ................................................................................................................ 20 Sidebar: The Legal Perspective—An Interview with Mauricio Basila, Partner, Basila Abogados, S.C. ....................20 Sidebar: The Regulatory Perspective—An Interview with Eduardo Flores Herrera, Vice President for Market Supervision, Comisión Nacional Bancaria y de Valores (CNBV) .............................................................21 A Closer Look at Mexico’s Investment Environment ............................................................................ 22 Sidebar: Making the Case for Growth Equity Investing in Mexico by Scott McDonough, Managing Director, Alta Growth Capital .............................................................................25 Sidebar: Mexico’s Real Estate Sector: An Attractive Investment Opportunity by Gregorio Schneider, Managing Partner & Chief Investment Officer, TC Latin America Partners ........................26 Spotlight: A Tale of Many Mexicos ..........................................................................................................................29 Case Study: Liquid Capital .......................................................................................................................................30 Exit Trends & Performance .................................................................................................................... 31 Sidebar: The Promise of a Local IPO Market in Mexico by César Pérez Barnés, Partner, Southern Cross Group ...........................................................................................32 Conclusion ............................................................................................................................................. 36 Sampling of Firms Investing in Mexico ................................................................................................. 38 Methodology ......................................................................................................................................... 40 2 | SPECIAL REPORT: PRIVATE EQUITY IN MEXICO ACKNOWLEDGEMENTS WE ARE GRATEFUL FOR THE GENEROUS SUPPORT WE RECEIVED FROM EMPEA MEMBERS AND INDUSTRY PARTICIPANTS IN PRODUCING THIS PUBLICATION. In particular, we would like to thank the numerous fund managers active in Mexico that donated their time and provided valuable data sets to help inform our analysis. We’d also like to thank the institutional investors, funds of funds, law firms and placement agents that shared their insights with us. We would especially like to thank the following firms for providing key thought leadership, as well as the financial support necessary for this syndicated report: CHAMPION SUPPORTING UNDERWRITERS INDUSTRY PARTNER Disclaimer: This information is intended to provide an indication of industry activity based on the best information available from public and proprietary sources. EMPEA has taken measures to validate the information presented herein but cannot guarantee the ultimate accuracy or completeness of the data and information provided. EMPEA is not responsible for any decision made or action taken based on information drawn from this report. Copyright © 2016 EMPEA. All rights reserved. Any reproduction and / or redistribution of any text, paragraph or illustration in whole or in part, without written permission from the publisher, is strictly prohibited. EMPEA • MAY 2016 | 3 A LETTER FROM EMPEA CONSULTING SERVICES Dear Reader, EMPEA Consulting Services is pleased to present this Special Report: Private Equity in Mexico, EMPEA’s second dedicated research coverage of the market since 2012. Descending through the haze on final approach to Benito Juárez International Airport, travelers to Mexico City are treated to a panorama of one of