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The View of Two Mexico Fund Managers



Two of Mexico’s more prominent private equity fund

managers say now is an optimal time to invest in

the ancient land of the Maya. Mexico City’s Nexxus

Capital, S.C. in recent years exited from two funds, one

with a realized gross IRR of 44 percent and a realized

gain of $US 214 million and another with a 30 percent

IRR and gain of $US36 million. A director at Nexxus,

Roberto Terrazas, 35, says their third fund, called

Nexxus Capital Private Equity Fund III, LP, has closed

with commitments of US$142 million, with additional

commitments of approximately $32 million available.

The fund started its marketing in January 2007. The

investment period may be three to six years. It has

made one investment and expects to make between five

and eight. Fund officials intend to invest in companies

between US$20 million and US$50 million in size. A

graduate of New Mexico State University and the MBA

program at CEPADE in Mexico City, Terrazas also says

the purchase valuations for Mexican companies are

often three to six times EBITDA, compared to about

nine times in the United States.


Terrazas says the fund’s major investors include the

International Finance Corporation, HSBC, the Mexican

Development Bank, Export Development Canada (EDC)

and the German bank DEG. More than 95 percent of the

total investment comes from institutional investors. The

fund will not co-invest with other funds, just limited



One aspect of the Mexican VC climate Terrazas says he

likes is that competition with other private equity firms

is “limited, so we can often negotiate good terms. When

we do an IPO, we usually exit the company.” And he also

appreciates the “macroeconomic stability of Mexico.”

One sector the third Nexxus fund intends to invest in

is financial services, including consumer, educational

and specialty financing. Health and fitness firms are

also being considered, including hospitals, clinical

laboratories, ophthalmologic and optical clinics,

orthopedic and plastic surgery clinics, nutrition and

specialized clinics. Managers at Nexxus will also

consider investing in the housing and tourism sector,

including low and middle income housing, marinas,

tourism services, light infrastructure, medium and long

term stay apartments and hotel chains. Education is

another field Nexxus may invest in, including K – 12

and English chain schools, and technical universities.

Consumer products and services is another sector,

including branded consumer products, logistics and

distribution and specialty retail. Companies involving

private security and waste treatment and management

are also being considered.


Terrazas agrees with Luis Perezcano, 42, a partner of

the closed NAFTA Fund of Mexico, LP, that raising

private equity funding in Mexico recently has become

easier. The NAFTA Fund started in 2003. It has always

maintained some US$40 million in funding and has

not exited a company.


The NAFTA Fund has five investments, including

US$8.7 million in the manufacturing firm Cabos

Marinos/Hooven Allison. The fund also invested

US$5.5 million in Grupo Editorial Armonia/Megazines

Publications. It also invested into logistics, putting

US$3.6 million in Pacific Star. Telecom is another area,

with $US4 million invested in Road 9. And the NAFTA

Fund loves ice cream, or retail consumer goods, putting

US$4.5 million into Helados de Norteamerica, the

Baskin Robbins master licensee for Mexico.

A graduate of Mexico City’s ITAM and the MBA

program at New York University, Perezcano says

in recent years Mexican valuations have done well.

During the last five years Mexican valuations have

about tripled, he says, compared to being quite

volatile throughout much of the world. Within

the last five years, the Mexican IPC rose about 400

percent compared to the American S&P rising some

80 percent.


Perezcano says that although the Mexican trading

multiples are “substantially below” that in the US,

there are “a lot opportunities to invest in the Mexican

private equity market,” more than in recent years.

Some companies are poised to grow. He also says he

is willing to co-invest with other funds and limited

partners. The NAFTA Fund has 30 investors, including

institutional ones such as a Mexican fund of funds and

US pension funds. He adds that Mexico has “very few”

institutional investors.