Search Funds: a solution for business succession in Mexico
Companies aren't dependent on biological factors like humans, but rather on management decisions regarding aspects such as finance and innovation. Succession planning is crucial, especially in family-owned businesses. In our country, only 30% survive to the second generation due to unclear plans. Power typically transfers to the eldest son or the founder's spouse, leading to complex transitions. When founders retire and descendants aren't interested, options like Private Equity, Strategic Buyers, or Search Funds arise. The latter, like Sapiens Capital, uphold the family legacy while introducing new management and growth strategies.
Challenges and Opportunities for Search Funds
Search Funds have been navigating a complex economic environment, with rising global interest rates posing a significant challenge to acquisitions. Despite this, Search Funds offer robust risk mitigation mechanisms, including stringent search criteria and diversified revenue streams. Additionally, the concept of nearshoring presents a compelling opportunity, particularly in countries like Mexico, where it could attract both domestic and foreign investment. Nearshoring offers advantages such as lower labor costs and strategic geographical positioning, making it an attractive option for companies looking to diversify their manufacturing bases away from China.
Search funds for Mexico
At Sapiens Capital, we believe that Mexico is one of the best markets for establishing a Search Fund, given our confidence in the country's enormous growth potential. Mexico boasts the second-largest economy in Latin America and ranks twelfth globally in terms of GDP (PPP), with authorities maintaining a prudent fiscal stance and relatively low levels of debt over the past decades. Furthermore, Mexico holds 12 free trade agreements with 46 countries, more than any other nation, and its optimal geographical location provides access to 61% of global GDP and over 50% of global trade.