Private equity building through labor savings in Mexico
Private equity company executives may be interested to learn that the Tecma Group of Companies has helped over 100 manufacturing firms and labor intensive organizations to decrease manufacturing costs and increase profitability and stockholder equity for nearly 30 years enabling them to achieve labor savings in Mexico.
Let’s focus on how doing this increases equity in manufacturing firms.
Can a private equity company just ‘throw a switch’ and experience both increased cash flow and leveraged equity growth by accessing resources in Mexico?
The answer to the aforementioned question is a definitive “yes.”
Specifically, as private and public equity companies seek profitability in their portfolios of manufacturers that access and utilize Tecma’s Mexico Shelter Manufacturing Partnership (MSMP) business model can substantially accelerate equity growth.
In fact, we would like to take this opportunity to demonstrate how select public equity or private equity companies can actually TRIPLE DIP into increased profits in their portfolios, expand present portfolios and participate in the profitability of the shelter company in Mexico with whom they can find a reliable and trusted partner.
Let the Tecma Group of Companies share a simple formula. We know that private equity company executives are already familiar with ‘offshore labor savings programs’ but many are unaware of the existence of ‘near shore labor savings programs?
Global changes are reducing benefits experienced in the past in China, Southeast Asia and India.
CEO’s are puzzling as to how to remain competitive when the United States government continues to heap regulation upon regulation on them, expand hidden taxes and force mandatory spending for social programs onto manufacturing firms that are struggling to maintain profitability.
‘Off Shore Programs’ are no longer the answer to cutting labor and overall manufacturing costs. Mexico labor savings present the closer to home answer.
Let’s examine closely how to build equity through reduced labor costs accessible in neighboring Mexico. Specifically, let’s look at the hypothetical example of a manufacturing company for which thirty- percent of its costs of goods sold can be directly tied to labor costs.
For example, consider the case of a company that has $30,000,000 in sales with $15,000,000 in costs of goods sold of which $4,500,000 are comprised of labor costs.
For purposes of illustration, the bottom line EBITDA of $5,100,000 supports a valuation of $51,000,000 applying a ten multiple to EBITDA.
The company reduces its labor costs 50% saving $2,250,000, increasing EBITDA to $7,350,000.
Applying the same ten multiple the valuation is now at $73,500,000. A $22,500,000 gain in value simply by deciding to produce its product in a near shore environment that provides access to significant labor savings in Mexico.
This is something that private equity companies with manufacturing firms in their portfolios can easily take advantage of by partnering in Mexico with the Tecma Group of Companies.
What can Tecma do to enable private equity companies to achieve labor savings in Mexico?
- Tecma actively seeks relationships with a select private equity or public equity company to provide the access to the MSMP business model. Using it will result in an increase in the equity in their manufacturing portfolios.
- The Tecma Group of companies sets the stage for future Joint Ventures on new acquisitions.
Tecma’s Mexico Shelter Manufacturing Partnership (MSMP) is a proven method of creating labor savings in Mexico which increases portfolio values and represents a path for future participation in Tecma Group’s profitability.
Contact the experts at the Tecma Group of Companies to learn more about opportunities for private equity firm executives.