Northgate Capital’s strategy in Mexico is to support small and medium sized companies (SMEs) in their development, offering private equity resources as equity or quasi-equity/mezzanine debt.
From the start, we’ve seen the local industry welcome Northgate as a cooperative, hands-on, and value-adding partner. Either by financing a company through our Growth Credit or our Growth Equity strategies, we believe that the most reliable source for sustainable value creation is an active and collaborative approach that supports the transformation of our portfolio companies (Credit or Equity). Thus, we seek differentiated strategies to identify, select, and execute value creation and operational transformation opportunities. Our professionals have the expertise to closely collaborate in either source of financing to support our portfolio companies’ development, accordingly.
Our Direct Growth strategies allow investors to access the Mexican middle market, targeting the right financial alignment, in sectors and companies offering great growth potential, while ideally providing an attractive risk return balance. Our experience enables us to constantly and actively collaborate with our portfolio companies in their development and plan-execution to achieve the goal of sustained value generation for our investors, either from the equity value increase capitalized at exit or cash flow to repay credit facilities.
Following a rigorous analytical process aimed to identify, design, and execute value creation initiatives, we focus on the key value drivers that need to be closely monitored and transformed from day one. When developing or evaluating long-term business plans with our partners, in addition to implementing corporate governance best practices, we always aim to achieve international operational best practices — regardless of the industry or sector in which the company operates.
Within our direct equity program, we pursue a generalist approach, seeking investments in a wide variety of industries. Through our global and local network, we aim to invest in SME with the following main characteristics:
Northgate is flexible enough to undertake either minority or majority interests and make primary and/or secondary investments, as long as incentives are well aligned among all stakeholders.
Through our Quasi-Equity/Mezzanine Debt investments, middle market Mexican companies requiring financing for Capex, strategic acquisitions, operation expansions, debt restructuring or equity reconfiguration, have access to an alternative source of financing that, in our experience, has not been common in Mexico. We believe this allows for higher leverage and longer holding periods.
Our approach permits borrowers to enter into a tailor-made debt structured transaction, optimizing the adequate ratio between debt and equity. Our approach is to actively overview company’s operations to comply with pre-agreed reporting, repayment/exit schedule with pre-payment optionality.
We pursue a cash flow lending strategy, where the source of repayment shall be the cash generation capacity of the borrower, but also rely on a strong security package.
Focused on performing senior-secured transactions that are structured similarly to a high yield bond but documented as a private loan for companies that do not have access to the national or international Debt Capital Markets.
Transactions that complement senior financing structures provided by commercial banks. These provide for additional leverage, subordinate positioning to the senior lenders, and typically have a longer average life.
Aimed to take advantage of illiquid cycles in the markets, targeting the purchases of loans at discounts from large portfolio asset managers.
