11 COMPANIES MERGED IN PAST YEAR

Mexico 2019 | ECONOMY | VIP INTERVIEW

TBY talks to Enrique Martínez y Morales, Director General of Unities Alliance Group, on new business models, going public, and a changing commercial environment in Mexico.

What does Unities Alliance Group bring to traditional Mexican family business?

Unities Alliance Group is a subsidiary of EFM Capital, which was funded approximately six years ago after the sale of a family business to a transnational company. EFM Capital is a solution that family businesses have when owners want to sell or divest, whatever the reason is. It is a humane and experienced team in structuring and perfecting this business model. EFM Capital comes in what we call the “Unities" model, which allows owners to sell their company to an existing company with a corporate structure. This company is Unities Alliance Group. We target medium-sized family businesses with an approximate billing of USD10-20 million per year, and we consolidate them into Unities Alliance Group, which has a larger billing and size, bigger leverage possibilities, higher possibilities of penetration in other markets, and the ability to create economies of scale within the group.

How has the market responded to this new business model, and what are the advantages of such a model?

So far, it has been extraordinary. Between mid-2018 and the start of 2019, we have merged 11 companies. All are now a part of Unities Alliance Group, and we divided them in three strategic business units. The first is IT, where we are Microsoft's main partner in Mexico, as we offer IT project development, integrated solutions and robotic automation. The second is industry, where we are focused on construction with steel structures, glass and crystal specialized and fire control systems. We are one of the few Mexican companies that have international certifications to construct specialized high-quality structures like the BBVA Bancomer stadium and other symbolic works. The last business unit is retail, with businesses focused on consumption and commerce. One of the advantages of our structure is how different businesses complement each other. We have many crossover sales. We sell licenses, steel, fire systems, and facades to the same customer, for example. This group of companies were chosen strategically complement each other.

What is expected from the company's listing on the public stock exchange?

The one that would go on sale in public markets is EFM Capital, so that Unities Alliance Group gains flexibility for the rest of the year to continue acquiring companies. EFM is a company specialized in acquiring and selling family companies in an average time of 24 months. In the event case we have full-grown strategic business unities, we are able to put them for sale. Unities is the vehicle that acquires, makes companies grow, turns them professional, makes them more efficient, normalizes them, and structures them in a business group that creates value that can be attractive to an investor. During the first six months, we try to get operational standardization, so that the second half of the year we can focus on new business integrations that can help increase revenue. Our turnover for 2019 is currently projected at around MXN2 billion (over USD100 million), and we have 1,500 employees. We are having conversations with companies that want to be part of our disruptive model.

What factors are shaping the business environment in Mexico at the moment?

Businesses in Mexico are going through a phase of digitalization. We have some top clients in this business line; some of them are listed on the stock exchange and work in the manufacturing industry. We provide them with robotic and automation equipment, leading them toward AI. The business atmosphere in Mexico is also marked by globalization and internationally by commercial tensions and the new NAFTA treaty. Product tariffs on some products, as well as technology products associated with productivity and automation has increased Asian interest in investing in Mexico. As for the business climate, in our sector, which is the one of family companies, we have not seen a fall in demand. On the contrary, we have seen more companies approaching us to participate in Unities Alliance Group's scheme. There is real opportunity in where three or more family companies merge to form a strategic business unit. Synergies and a bigger organization encourage growth.

Which sectors is the company considering for diversification in the future?

Our priority is acquiring new companies form the sectors in which we already are investing, to get a larger market share. We receive proposals from companies, and some have a natural synergy with our divisions. Others are in lines that we will explore, like educational services or pharmaceutics. If added, they would be a new division, which would imply a bigger level of diversification. We provide attention to the companies that approach us; we evaluate them in an efficient way, as we can close the deal with companies in a few months thanks to the Unities scheme. Whatever the sector, we look for companies where we can provide an additional value, though. If the company is already mature or has reached its growth limit, it will not be of interest unless it can add value to the companies we have already acquired. Also, our focus is to invest in companies that have a positive impact on people and communities. We are open to exploring new industries, with the exception of alcohol, tobacco and gambling.