Entrevista con Roberto Terrazas, Managing Director & CIRO, Nexxus Capital
Q1: Please provide some background on Nexxus Capital. When was it founded?
Nexxus Capital, founded in 1995, is one of the largest and one of the top-performing alternative asset managers in Mexico. Nexxus Capital has raised USD$1.2 billion across five funds and is the only manager to list 5 companies in the Mexican Stock Exchange. Its core investment strategy is investing in mid-sized Mexican companies, but is currently expanding with a Mexico-focused mezzanine fund and a Spanish private equity fund, Nexxus Iberia.
Q2: In terms of investments, what would be a typical ticket size that you’d make to an investment in México? How do you go about finding and selecting the best investments?
Nexxus Capital invests US$25 – 70 million in mid-sized Mexican companies with revenues in the range of US$50 – 300 million, purchasing both influential minorities or majority positions, and now with Nexxus Capital Mezzanine Fund executing debt structures.
Q3: In what ways is the private equity opportunity in México different from other asset classes?
There are several factors that position Mexico as an attractive market for PE such as, small and medium-sized companies represent the vast majority of the companies, macroeconomic stability and resilience, unpenetrated credit to the private sector, unpenetrated private equity industry and attractive investment multiples, among others.
Q4: Mexico has recently experimented growth on this industry. In your own opinion, what factors have made this possible and do you believe these behaviors will continue in the future?
Back in 2009 when the local pension funds began investing in alternative assets through the “CKDs” the market experienced significant growth. Today, nearly after 10 years, the market has begun a consolidation process between GPs and LPs. Capital commitments will continue to grow in the region, but into a reduced number of more experienced GPs.
Q5: In terms of exits, please describe recent transactions and buyers, as well as in general the exit landscape in Mexico. Is there any success case you want to comment about?
Mexico’s PE market is still in development. A clear example is the number of PE companies sold/purchased among Funds, which in developed market can reach a third of the transactions. Recently, Nexxus Capital executed both an exit and an investment involving other PE Funds, over time transactions such as these should increase.
Q6: What is your advice to LPs interested in approaching Nexxus Capital or a Mexican GP in general?
Bear in mind the size and stability of the Mexican economy, coupled with the unpenetrated Mexican private equity environment, presents an attractive opportunity for investors. Additionally, an investor should look for a GP with solid track record, strong deal flow capabilities, transactions with the right economics and exit availability, among others.
Q7: What is your take on the current state of the private equity industry in Mexico? What changes do you feel are most important for the region in order to make the Mexican industry attractive for international LPs?
The culture of the Mexican entrepreneur is changing for the best, before the idea of selling their business was not well received and now are more interested in analyzing PE opportunities. Additionally, regulation related to capital markets should progress in order to allow for a more dynamic market, which in turn should create a friendlier environment for smaller caps. With the participation of the Mexican pension funds, more GPs are creating track record.