Summary of Proposed Investment
Project Number
10469
Company Name
HSBC Tower II Equity Partners (Cayman) L.P.
Date SPI Disclosed
Dec 12, 2000
Country
Latin America and the Caribbean Region
Industry
other
Projected Board Date
Jan 22, 2000
Status
Completed
Sector
Private Equity/Venture Cap Fund - Regional
Department
Equity Portfolio Management
Environmental Category
FI
Previous Events
Approved : Mar 14, 2001
Signed : May 14, 2001
Invested : Jun 19, 2001
Project Description
Project Descripton
The project involves establishing the HSBC Tower II Equity Partners L.P., a US$300 million target private equity fund, with an eight year life span, sponsored mainly by HSBC Argentina Holdings S.A. (HSBC). The project also involves establishing HSBC Private Equity (South America) Ltd. (the general partner) that will be majority owned by HSBC. The fund will seek to generate superior returns from privately-negotiated equity investments in small to medium, privately held enterprises in the Mercosur region and neighboring countries that need capital and better management. Investments will include development capital financing, venture capital financing, share purchases and acquisitions in a broad range of sectors. The fund will invest in companies that have strong sector leadership and value appreciation potential through management, superior technology, market position and other competitive advantages. The fund, with active financial and management support, will assist these high potential investees to grow with discipline into globally competitive and attractive companies through corporate governance, strategic planning and guidance, financial and operational supervision, formation of strategic alliances with local and foreign firms, mergers and acquisitions, and other strategies.
Development Impact
First, there is a major capital and financing constraint in the Mercosur region, and IFC can contribute to increase the flow of equity capital into the region for SMEs in need of financial and management support. Scarcity of capital has also affected the private equity industry, and several initiatives have been delayed or put on hold. Private equity funding will be critical to the fund''s rehabilitation and expansion efforts as Latin America recovers from the recent difficult economic and market environments and as these companies prepare for competition in globalized markets. The fund will continue to help local SMEs become regionally and internationally competitive and also increase the number of enterprises eligible for public listing. Second, this fund will allow IFC to continue to help develop the private equity industry in Argentina, and the Mercosur region. IFC and the sponsor''s early relationship in private equity (Ropasa Sadicar) was innovative at the time and later gave way to a successful second fund (Tower Fund), which helped lead the way to a private equity "industry" in Argentina, which is deepened with the launch of this extension fund - HSBC Tower II Equity Partners L.P. Third, this fund is expected to contribute to the local and regional economy by investing in and strengthening the operations of sustainable enterprises. Lastly IFC''s investments in private equities in general is an effective investment vehicle that supports new and growing industries, provides cross border liquidity, serves as a platform for strategic alliances, and drives job creation and innovation.
Development Impact Evidence from the Tower Fund
The success of the Tower Fund to date is evident from both a profitability and development viewpoint. Most of the fund’s investments benefited from the introduction and/or improvement of the following: international accounting, auditing, reporting and disclosure standards; corporate governance through the fund’s active participation in the Board of Directors; strategic planning, financing, and resource allocation; and most importantly, guiding SME’s to expand and compete globally. As a result, the fund’s activities and investments have further helped to attract international investors into the local region.
IFC Role
IFC has many roles in this project. First, IFC is one of the lead investors in the original Tower Fund, and will play an important anchor investor role to help the fund raising efforts currently underway for this extension fund by providing comfort to potential investors as it is questionable today whether potential investors would commit substantial amounts to the fund without the presence of high caliber institutions. Second, IFC has an important role both in the structuring and governance of the fund and the fund manager, so that the interests of the sponsor and fund manager is best aligned with that of the investors. IFC has stressed the IFC private equity lessons learned, and the sponsor has been responsive to concerns that have been identified and to incorporate best practices into legal provisions. This cooperation will raise the fund’s chances for successful implementation and will help establish best practices in the regional markets.
The project involves establishing the HSBC Tower II Equity Partners L.P., a US$300 million target private equity fund, with an eight year life span, sponsored mainly by HSBC Argentina Holdings S.A. (HSBC). The project also involves establishing HSBC Private Equity (South America) Ltd. (the general partner) that will be majority owned by HSBC. The fund will seek to generate superior returns from privately-negotiated equity investments in small to medium, privately held enterprises in the Mercosur region and neighboring countries that need capital and better management. Investments will include development capital financing, venture capital financing, share purchases and acquisitions in a broad range of sectors. The fund will invest in companies that have strong sector leadership and value appreciation potential through management, superior technology, market position and other competitive advantages. The fund, with active financial and management support, will assist these high potential investees to grow with discipline into globally competitive and attractive companies through corporate governance, strategic planning and guidance, financial and operational supervision, formation of strategic alliances with local and foreign firms, mergers and acquisitions, and other strategies.
Development Impact
First, there is a major capital and financing constraint in the Mercosur region, and IFC can contribute to increase the flow of equity capital into the region for SMEs in need of financial and management support. Scarcity of capital has also affected the private equity industry, and several initiatives have been delayed or put on hold. Private equity funding will be critical to the fund''s rehabilitation and expansion efforts as Latin America recovers from the recent difficult economic and market environments and as these companies prepare for competition in globalized markets. The fund will continue to help local SMEs become regionally and internationally competitive and also increase the number of enterprises eligible for public listing. Second, this fund will allow IFC to continue to help develop the private equity industry in Argentina, and the Mercosur region. IFC and the sponsor''s early relationship in private equity (Ropasa Sadicar) was innovative at the time and later gave way to a successful second fund (Tower Fund), which helped lead the way to a private equity "industry" in Argentina, which is deepened with the launch of this extension fund - HSBC Tower II Equity Partners L.P. Third, this fund is expected to contribute to the local and regional economy by investing in and strengthening the operations of sustainable enterprises. Lastly IFC''s investments in private equities in general is an effective investment vehicle that supports new and growing industries, provides cross border liquidity, serves as a platform for strategic alliances, and drives job creation and innovation.
Development Impact Evidence from the Tower Fund
The success of the Tower Fund to date is evident from both a profitability and development viewpoint. Most of the fund’s investments benefited from the introduction and/or improvement of the following: international accounting, auditing, reporting and disclosure standards; corporate governance through the fund’s active participation in the Board of Directors; strategic planning, financing, and resource allocation; and most importantly, guiding SME’s to expand and compete globally. As a result, the fund’s activities and investments have further helped to attract international investors into the local region.
IFC Role
IFC has many roles in this project. First, IFC is one of the lead investors in the original Tower Fund, and will play an important anchor investor role to help the fund raising efforts currently underway for this extension fund by providing comfort to potential investors as it is questionable today whether potential investors would commit substantial amounts to the fund without the presence of high caliber institutions. Second, IFC has an important role both in the structuring and governance of the fund and the fund manager, so that the interests of the sponsor and fund manager is best aligned with that of the investors. IFC has stressed the IFC private equity lessons learned, and the sponsor has been responsive to concerns that have been identified and to incorporate best practices into legal provisions. This cooperation will raise the fund’s chances for successful implementation and will help establish best practices in the regional markets.
Sponsor / Cost / Location
Development Impact
Related ESRS/ERS
Contacts
For Inquiries About the Project, Contact
Enrique Ruete
Director, HSBC Argentina Holdings, S.A.
Av. de Mayo 701 - Piso 27
(1084) Buenos Aires
Argentina
ttfadvis@elsitio.net
Director, HSBC Argentina Holdings, S.A.
Av. de Mayo 701 - Piso 27
(1084) Buenos Aires
Argentina
ttfadvis@elsitio.net