1. Can Private Equity Say Hola?
November22, 2011 Cisco Martinez
Hispaniccompaniesare growingattriple the rate of the national average. Justaskprivate equity
company HCP & Company (formerlyHispaniaCapital Partners),whichopened the first
nationwide Hispanic-focusedfund in2004. Since thattime alone,the HispanicAmerican
populationhasgrownfrom35 milliontoover50 million,contributingmore than fiftypercentof
the nation’spopulationgrowthoverthe past decade withimmigrationasasignificantgrowth
factor.
At 16.3 percentof the U.S. population,Hispanics are the secondlargestmarketinthe U.S. This
translates intoovera $1 trillioninpurchasingpower. The U.S.Hispanicpopulation
independentlymakesupthe third largestSpanishspeakingmarketinthe Westernhemisphere
behindBrazil andMexico.Regionalization of thismarketwithinthe U.S. createsa demandfor
businesses thatserve thisdistinctsegment.
Nexos,anotherprivate equityfirmthat hasa focuson the U.S. Hispanicmarket,viewsthistobe
particularlyrelevant inthe food,media,telecom,andfinancial servicessectors. Withinfoods
and otherconsumergoods,Nexosbelievestheycanrepositionnon-Hispanicbusinessesto
betterserve thismarket,andtheycan expandthe productofferingof Hispanicbusinessesto
capture the upmarketof generationsof Hispanicsthatare becoming more affluent. Prior
investmentsinclude the SouthernCalifornia FoodServicesHoldingCompany,locatedinone of
the biggestHispanicmarketsinthe U.S.
Nexoshas alsoobservedthatwithinmediaandtelecomthere are opportunitiesforHispanic
stationownershipandmarketingbudgetsforHispanic mediaare growingat over15 percent.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1970 1980 1990 2000 2010
PercentHispanic of the Total U.S.Population
2. LatinVisionMedia,inpartnershipwithNew YorkCity’sLatinMediaandEntertainment
Commission,establishedbyMichael Bloombergtomake New Yorkthe capital of LatinMedia
and Entertainment,plantoleverage the marketof 12.95 millionHispanictelevisionhomesin
the U.S. LatinVisionisacompanythat bringstogetherbuyersandsellersof Latinbusinesses.
Nexosalsoseesopportunityin the financialservicessectorwith increasedHispanicdemandfor
bankaccounts, mortgages,creditanddebitcards,and otherfinancial services. Three of the four
principals atNexoshave aHispanicbackgroundandtheybelieve thisgivesthemanedge in
sourcinglucrative opportunitiesinthismarketcharacterizedbyfragmentationandfamily
ownership.
However,GaryNusbaumof PalladiumEquityPartners saysbelievesthatthe U.S.Hispanic
marketaffectseveryindustry. Palladiumwaslaunched byMarcosRodriguezinorder to bring
“Wall Streetto the barrio.”Theyhave $1 billioninvestedinLatino-relatedsmall andmidsized
companies. Palladium, likeotherfirmswithHispanic-focusedfunds,believesthattheycan
approach thissegmentmore effectivelywiththeiruniquedemographicfocusandnetwork.
SpecificallyPalladiumseekstoprofitoff of fourthemes:youthandfamily,underservedindustry
sectors,culturallytargetedproducts,andthe Hispanizationof America.
Palladium’sinvestmentsinclude Todobebé,whichtranslatestoeverythingbaby.Todobebé isa
multimediafirminMiami forSpanish-speakingfamilieswithkidsunder5. Theyhave developed
television andradioshows,awebsite,amagazine, anda parentingguidebookcalled The
TodobebéBook.One of theirtelevisionshows, Viva a Familia!,wasthe numberone U.S.
networkshow,inEnglishorSpanish,initsdebutonUnivision.
Anotherone of Palladium’sinvestments,CastroCheese,wasfoundedbyMexicanimmigrant
Maria Castro inher kitchen. ItsLa Vaquitabrandissoldto supermarkets,restaurants,andhotels
worldwide. Palladiumwasable toacquire thisbusinessthat large strategicbuyerscouldnot.
Maria Castro onlyagreedto sell hercompanyafterSpanishbornAlex Ventosa,aPalladium
managingdirector, spentayear convincingherthatPalladiumwouldtake goodcare of her
familybusiness. “Alex’saccent…remindedherof hergrandfather”saysRodriguez.Thisspeaksto
the advantage that Hispanicfocusedfundscangainthroughthe Hispanic network.
From the LP standpoint,theysee the U.S.Hispanizationasa long-terminvestmenttheme.Chris
Ailman,Chief InvestmentOfficerof the CaliforniaState Teachers’RetirementSystem(Calstrs),
saysthat Hispanicswill have asgreatan impact onthe U.S.economyas the Baby Boomersnow
and Europeanimmigrantsinthe lastcentury. Calstrshascommitted$40 millionwithPalladium.
Palladiumhasbeenable toattractother large investorsandpensionfunds,suchasSpanishbank
BBVA and the CaliforniaPublicEmployees’RetirementSystem(Calpers).
A 2008 CensusBureauprojectionestimatedthatethnicandracial minoritieswillmake upthe
majorityof the U.S. populationbythe year2050, withHispanicsbeingthe majoritygroup.
Businessesshouldmarket tothe majoritymarketsegment.Historically,U.S.Hispanicbusinesses
have beenconstraineddue tolackof expansionfinancing.In2002 there were 1.6 million
Hispanic-ownedcompaniesinthe U.S.,butaccordingto researchgroupHispanTelligence there
isprojectedtobe 4.3 millionHispanic-ownedcompaniesinthe U.Sby nextyearwithprojected
revenuesof more the $539 billion.
