Business & Financial Services

InverCap Holdings

www.invercap.com.mx
Country Mexico
Sector Business & Financial Services
Deal type Buyout
Investment date November 2012
Status Unrealized investment

InverCap Holdings is the fifth-largest mandatory pension fund administrator in Mexico. Through its main subsidiary, Afore InverCap, the company manages over $10 billion in retirement savings on behalf of approximately three million workers. Founded in 1997 and headquartered in Monterey, InverCap has consistently increased assets under management (AUM) by delivering industry-leading investment performance for investors in its funds.

A RARE OPPORTUNITY
IN A FAST-GROWING MARKET

With over 18 years of investment experience in Mexico and a successful track record in the country’s financial services sector, Advent International identified InverCap as a premier but scarce asset in a high-growth industry. The company was growing at double-digit rates, driven by rising market share based on its top-tier investment performance and strong commercial capabilities. InverCap had more than 2,700 sales agents in 77 Mexican cities as of 2012, and we believed this distribution network would fuel continued organic growth.

We were optimistic we could leverage these operating strengths to take advantage of the tremendous opportunities we saw in the overall marketplace. Mexico enjoys the demographic advantages of a young workforce and an expanding middle class. These factors, plus significant labor market reforms, have combined to make the country’s emerging pension system one of the fastest growing in the world—a trend we expected to continue.

Mexico’s pension management sector was consolidating rapidly, placing InverCap at a crossroads. As InverCap CEO Cesar Montemayor put it, “We needed a world-class investor to provide an integral solution to our capital needs.” The Advent team, meanwhile, saw an opportunity to partner with a CEO who had a proven ability to grow the business. Advent acquired a significant stake in InverCap in November 2012 and is currently the company’s largest shareholder.

BUILDING ON EXISTING STRENGTHS

Our value creation plan focused on leveraging InverCap’s existing capabilities to drive organic growth and increase market share.

One key component was reinforcing the company’s already robust distribution channels by accelerating the hiring of additional sales agents and expanding into new cities. Since our investment, InverCap’s sales force has grown more than 30% to approximately 3,600 agents, and the company has opened 10 new branches and extended its coverage to four new cities. It has also launched a joint venture with one of Mexico’s largest retailers to attract customers through that company’s 400-branch network.

Through these efforts, InverCap has not only increased the number of new customers, or “affiliates,” but also managed to attract customers with approximately 33% higher AUM balances, on average, than at the time of our investment.

In addition to helping build the sales team, Advent worked with the company to strengthen the senior leadership and middle management by making several key new hires. At the same time, InverCap launched a major upgrade of its IT systems to automate financial reporting, introduced a comprehensive operational balanced scorecard to strengthen controls and procedures and implemented a more robust portfolio management system.

 

RAMPING UP GROWTH AND POSITIONING INVERCAP
FOR THE FUTURE

Despite a relatively short collaboration, the Advent-InverCap partnership is already generating strong results. Revenue and EBITDA have grown at double-digit rates from 2012 to 2014, while AUM has increased 50% from 101 billion pesos to 151 billion pesos. During the same period, InverCap was ranked No. 1 in Mexico by net AUM transferred in and No. 3 by net customers gained, according to pension system regulator Consar. The company has expanded its market share considerably and, as of December 2014, is Mexico’s fifth-largest fund manager by AUM, up from No. 9 prior to Advent’s investment.

“InverCap is positioned for strong growth well into the future,” said Luis Solórzano, managing director and head of Advent’s Mexico City office. “We’re excited about building on our partnership to continue expanding the business and delivering exceptional performance for millions of employees in Mexico.”

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