Supporting Growth at Mexican CompaniesTue, 08/08/2017 - 15:48
Q: Nexxus Capital is run and managed by Mexicans. What advantages does this give you over other investment funds?
A: Nexxus Capital has been in the market for over 19 years. An important advantage is that we know the country, we know a lot of people and we can add more value more quickly to our investments than a fund manager established in another country. We are a generalist fund, meaning that we invest in any kind of company that needs growth capital. Nexxus Capital is among the most important firms in terms of managed assets. Of the US$51 billion managed by funds registered in AMEXCAP, Nexxus is responsible for almost US$1 billion. We are in the process of investing our sixth fund and we soon expect to raise our seventh fund as well as an additional fund specialized in debt. We are also working to set up a fund in Spain for medium-sized companies.
Q: What is Nexxus Capital’s view of the belief that instead of a shortage of investment funds there is a shortage of projects in which to invest?
A: The need for capital is infinite; however, out of this infinite number of companies that we could target, we must analyze which companies can grow and then which companies also want to grow and are looking for capital. The next step is to analyze which of these projects provide results that are attractive for the fund. Finally, we must consider two things: conditions and prices. That is why it is sometimes said that there is more money than projects or companies appropriate for investment. The fintech sector provides a good example. An appraisal of fintech companies shows that most are losing money. In a business like ours, we need to recognize how much a business can grow, not how much it is losing.
Q: Why has the private sector not taken advantage of private equity in Mexico?
A: It is important to recognize that private equity in Mexico is a relatively young industry. It is a country in which private equity funds arrived before Mexican companies understood what private equity could do for them. This has led to a slower adoption rate of private equity among medium-sized companies. Still, adoption depends on the industry. In the infrastructure sector, the situation is somewhat different, since you are talking with more sophisticated people who have experience using private equity. It is similar in real estate. The learning curve in sectors like infrastructure or energy has been faster than in other sectors.
Q: What needs to be done to boost the participation of more companies in the Mexican Stock Exchange?
A: Of all the companies listed in the BMV, Nexxus Capital has helped five of these launch their public offering and soon we will be responsible for a sixth company listed. There are a number of reasons why companies are reluctant to go public. The first is fiscal policy. In most countries, a company eyeing an IPO understands that its fiscal burden will likely be reduced because the host country recognizes that the company will be in the country for a long time. In Mexico, this special tax regime is not applied, meaning that the tax that is being paid by public companies is 30 percent, while in Brazil it is 15 percent, in Spain, 18 percent, and in the US, 19 percent.
Entering to the stock exchange can also be traumatic for some companies. When a company is family-owned, decisions are made in the dining room. When the company becomes associated with private equity, they lose control and decisions must be subject to a vote. When you are a public company, you have to take into consideration not only a partner who sits with you to make some decisions, but also all your investors, to which you must report everything related to the company within a 24-hour period. There are several companies and families that are not willing to undergo this ordeal. One out of every five companies listed on the New York Stock Exchange has or had the help of a private equity fund. In Mexico, in the past 15 years, one out three companies listed on the BMV has had the sponsorship of private equity funds.