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Advent International acquires Gayosso

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25 October 2007, Mexico City - Advent International, one of the world’s leading global buyout firms, today announced that it has acquired 100% of Grupo Gayosso, Mexico’s largest funeral services company, from private investors in a leveraged buyout valued at US$317 million. The transaction was funded with equity provided by Advent and US$195 million in acquisition financing led by Scotiabank of Canada and Ontario Teachers’ Pension Plan.

Demonstrating Advent’s continued leadership and innovation in Latin America, the buyout features a novel financing structure. In addition to a senior term loan and working capital facility, it includes a US$40 million subordinated loan with an eight-year bullet payment—a first in Mexican private equity. The landmark deal illustrates the banks’ confidence in Gayosso as well as the long-term stability of the economy and Advent’s proven track record in the market.

With this latest investment, Advent continues to lead the rise in LBOs in Latin America. Last year, the firm sponsored the first private equity deal in Mexico to use cash-flow-based debt—the buyout of clothing retailer Milano. It also led one of the largest LBOs in Brazil in 2006—the $500 million purchase of duty-free retailer Brasif, in partnership with Dufry.

Founded over 100 years ago, Gayosso offers a complete range of funeral products and services through a nationwide network of 25 funeral homes, 21 cemeteries, six mausoleums, 16 chapels and 12 crematories. The company is the product of more than a dozen mergers and acquisitions over the past 30 years, including the merger of the two leading players, Jardines del Tiempo and Gayosso, to create the preeminent operator in the market. With a presence in 16 cities, the group reaches approximately 50% of Mexico’s population.

“Gayosso is by far the leader in Mexico’s funeral services industry,” said Alfredo Alfaro, a partner in Advent’s Mexico City office. “The company has critical mass, strong brand recognition and consumer loyalty, and healthy cash flow. Additionally, it has become the most efficient operator and consolidator in the market. We see significant opportunities to grow by acquiring incumbent players in key cities not served by Gayosso and by opening new facilities in select locations.”

Gayosso is one of the few players in the country to offer fully integrated services, ranging from funeral home services, cemetery burials and cremations to urns, mausoleums, caskets, flowers, catering and transportation. Its business is divided into two main segments: at-need services, purchased at the time of need, and pre-need services, purchased in advance and usually sold in packages of several services on a 12- to 24-month installment basis. The pre-need side of the business represents the majority of the company’s sales and the main driver of growth in the future. 

The Mexican funeral services market is expected to experience consistent long-term growth, as the population ages and the death rate rises in line with the country’s demographic evolution. Further, the expansion of Mexico’s middle class and increase in disposable income mean more people will be able to afford pre-need death-care services. The industry remains highly fragmented and ripe for consolidation, with the vast majority of funeral services companies still owned by families.

In conjunction with the buyout, Advent has appointed a new CEO of Gayosso, Rafael Obregón, and named one of its operating partners, Kenneth Budde, to the company’s Board of Directors. Mr. Obregón was previously CEO of Casa Herradura, Mexico’s premier Tequila producer, sold last year to Brown-Foreman. He also held senior positions at leading multinationals such as Pepsi, Kellogg Co. and Allied Domecq. Mr. Budde was formerly CEO of U.S. funeral services company Stewart Enterprises, which owned Gayosso for five years before selling the business to Jardines del Tiempo. He has over 20 years of experience in the funeral services industry.

Mr. Obregón said, “Gayosso is a great company with the No. 1 market position and a nationwide presence. I look forward to working with Advent and our management team to further institutionalize the business, enhance our pre-need offering with new products, and expand our footprint, both in existing markets and through acquisitions in unserved areas.”

Gayosso is the latest acquisition by Advent’s $1.3 billion Latin American Private Equity Fund IV, the region’s largest private equity fund, raised earlier this year. It continues an active period of investment for Advent in Latin America. In the past 12 months, the firm has completed six new buyouts, three add-on acquisitions and three IPOs/trade sales. A few of the more recent investments are Viena, the leading casual dining restaurant chain in Brazil; Grupo RA, the No. 1 operator of restaurant concessions in Brazil’s main airports; and La Mansión, a leading operator of casual dining restaurants in Mexico.

Since entering the region in 1996, Advent has invested in 34 Latin American companies with a combined enterprise value (currently/at exit) of $5.7 billion. For the past two years, the firm has been voted Latin American Private Equity Firm of the year in a reader poll organized by Private Equity International magazine and PrivateEquityOnline.com. Additionally, Milano was named 2006 Private Equity Deal of the Year by LatinFinance.

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