Executive: Benoit Verbrugghe, Member of the Executive Committee
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LAVCA spoke with Benoit Verbrugghe, Member of the Executive Committee for Ardian, about their regional strategy for Latin America, including the opportunity in infrastructure and renewable energy and staffing and opening an office in the region in the near-term.
LAVCA: Please provide some background on Ardian.
Verbrugghe: Founded in 1996 by Dominique Senequier, Ardian operates globally from 12 offices with more than 470 employees. We manage US$65bn of assets on behalf of a global and diversified LP base, comprising government agencies, pension funds, insurance companies, banks, charitable foundations, endowments, family offices and HNWI. We invest across five alternative asset classes including Fund of Funds, where we are the world’s largest investor in North American and Western Europeean secondary transactions and an active co-investor across our GP base. In Direct Funds, our European small and mid-cap Buyout strategies are high performing and one of the most recognized franchises in the region, additionally we have recently established a North American Buyout team. We are Europe’s biggest Infrastructure Funds manager and one of the continent’s main providers of Private Debt to private-equity backed companies. Finally, we have a growing presence in European Real Estate, with a focus in core+/value added assets.
LAVCA: As a European investor, why are you targeting LatAm now? How long have you been investing in the region?
Verbrugghe: Ardian is present on three continents. While our roots are indeed European, roughly US$25bn of AUM is based in the Americas and developed Asia, US$23bn and US$2bn, respectively. We have been active in North America since the opening of our New York Office in 1999 and in Asia since 2005 with the opening of our Singapore Office. We now maintain additional offices in San Francisco (2015) and Beijing (2012). We are also getting more involved in South America; linked to our existing network of advisors, executives and relationships with senior industrial investors, we have become increasingly active in the Andean region. Ardian in 2016 completed its first direct LatAm investment; the acquisition of four solar plants in Chile and Peru. In the particular case of Infrastructure, we believe there is a fantastic opportunity to develop and build infrastructure assets in LatAm, which will contribute to the economic growth of the region.
…we believe there is a fantastic opportunity to develop and build infrastructure assets in LatAm, which will contribute to the economic growth of the region.
We have a core belief that we do not chase growth at any price. When it comes to growing and nurturing our new activity, we take time, we are cautious. Ardian is now a very significant and established player in Europe and we are aiming for the same success on the other side of the Atlantic. Latin America is a growing region with excellent investment opportunities and we expect this tendency to keep increasing; our pipeline is continuously expanding to different countries and sectors, so we want to maintain a solid relationship with key players in the market and monitor each opportunity closely in order to find the right moment to deploy more capital.
Latin America is a growing region with excellent investment opportunities and we expect this tendency to keep increasing.
LAVCA: What is your regional strategy for accessing opportunities in LatAm?
Verbrugghe: We will adopt the same strategy based on a multi local presence and long-term, disciplined investment philosophy present in the company’s other geographies and activities. It’s vital for us to identify people and businesses who not only have deep local connections but who understand our distinctive culture and share our ambition to build substantial businesses over decades. We have been developing some strong relationships with industrial groups, investors and advisors in LatAm for several years now and we aim to leverage this network to seize opportunities.
In conjunction with the above, our near-term strategy entails staffing and opening our first office in the region, continuing to nurture and further develop our local network of market participants via increased travel to the region, and participation in industry organizations like LAVCA. In addition, we will leverage the relationships Ardian has with European multinational players already present in the region to invest in LatAm following the model we have in Europe.
LAVCA: You made your debut infrastructure investment in LatAm in 2016 with renewable energy in Peru and Chile. How does LatAm compare to what you have seen globally for infrastructure investing opportunities? What types of projects do you look for in the region?
Verbrugghe: Ardian Infrastructure acquired four solar photovoltaic (PV) plants in Chile and Peru from Solarpack a Spanish multinational company specializing in the development, construction and operation of solar PV plants. This first direct investment in South America is a perfect illustration of both our ability to source attractive investment opportunities, thanks to our industrial partners, as well as the similarities we’ve identified in LatAm and European infrastructure investing.
We invest in core/core+ essential infrastructure, i.e. toll roads, airports, energy distribution and storage, railways, water/waste treatment, and clean tech. It’s been proven key for Ardian to work with an international network of industrial partners, construction companies, and infrastructure operators in both regions, not least in order to ensure success in navigating the intricate stakeholder and regulatory norms in each region. Presently, we are reviewing opportunities in various sectors, with a majority focused on energy and transport in different countries; Chile, Mexico, Peru, Colombia in particular. We believe that investment in infrastructure is the best way to contribute to economic performance as well as to companies themselves.
Presently, we are reviewing opportunities in various sectors, with a majority focused on energy and transport in different countries; Chile, Mexico, Peru, Colombia in particular.
LAVCA: Ardian started in 1996 with the European Mid Cap Buyout as a first strategy. Have you thought about expanding the business of some of these European companies to LatAm?
Verbrugghe: While our first direct investment in the region was in 2016, we have actively acquired local businesses as build-ups for our European Portfolio companies since 2010. The Mid Cap Buyout strategy is the founding expertise of Ardian activities; in this strategy portfolio companies benefit from the experience of the investment team when implementing growth strategies (buy and build strategies, international expansion, development in emerging countries, development of distribution networks) as well as in organizational and operational improvements. In this respect, the broad network established by Ardian is a key advantage in providing portfolio companies with international growth opportunities. Over the last seven years, the team has supported portfolio companies in the acquisition of nine build ups in LatAm, with specific exposure to Brazil, Mexico, Chile, and Ecuador. We expect this trend to continue for our next generation funds.
LAVCA: How does ESG play a role when investing in LatAm and how are you integrating best practices from your global portfolio in the region?
Verbrugghe: We regard responsible investment practices and ethical behavior as essential objectives to help achieve the outstanding returns that we seek, and we believe strongly in the principle that shared responsibility and shared efforts should lead to shared rewards. This is why we have pioneered the practice of sharing a portion of the capital gains on successful exits with every employee of the companies involved since 2008.
We play an active role in several industry-wide organizations and initiatives dedicated to furthering the principles of responsible investment and see this as an essential part of our commitment to speak up publicly for the values we believe in. We will apply the same level of commitment to all the funds we invest in and to all the direct investments we make in the region. By supporting companies’ sustainable growth, we help to create jobs, we improve the infrastructure that the whole community relies upon, and we deliver value that can be shared. Additionally, we like to collaborate with the local communities helping their development and making sure that our investments are integrated.
LAVCA: Why did you join LAVCA?
Verbrugghe: We started our relationships with Latin American clients back in 2011 during the fundraising of our mature secondary strategy; since then our client base has grown rapidly reaching ~30 investors within several countries, with the expectation of continued expansion. One of the reasons behind joining LAVCA is to help us be more aware of regional initiatives, groups, and investment activities. We want to reassure our clients that we are committed to the region and that we want to contribute to further develop the private equity industry here. We recently hired a local professional who will be focusing on leading relationships in LatAm and potentially building our local presence in the near term. Additionally, the plan is to continue increasing our exposure to Latin America through infrastructure investments, contributing to the economic growth of the region, and selectively through private equity investments. We think that our size and reach together with the experience of LAVCA will help us generate a positive impact in the market.