Private equity says 'hola' to Latino firms

As a boy on the rough streets of Washington Heights, N.Y., 46-year-old Marcos Rodriguez saw his father toil as a hotel waiter to raise his kids. His dad, once a successful Havana businessman, had lost his land to the Cuban regime.

Vowing to honor his parents' hard work, Rodriguez earned an MBA from the University of Pennsylvania's Wharton School, worked for GE in Mexico, then became a successful financier.

"One great lesson I learned from my parents," Rodriguez says, "is that no one can take away what's in your heart and in your head."

Reflecting his father's entrepreneurial spirit, Rodriguez left buyout firm Joseph Littlejohn & Levy 11 years ago to launch Palladium Equity Partners, a fast-growing investment firm in New York with $1 billion invested in Latino-related small and midsize companies.

"We're bringing Wall Street to the barrio," Rodriguez says.

Palladium and a growing number of private-equity firms invest in what bankers call the "U.S. emerging domestic market," or ethnic and urban businesses. More than 55 such firms manage $10 billion in capital, according to the National Association of Investment Companies.

Competition increasing

Now, large investors and Fortune 500 companies are vying for Hispanic, African-American and Asian-American consumers. Palladium especially is eyeing the 40 million Latinos who are 15% of the U.S. population. Market-research firm HispanTelligence projects U.S. Latino purchasing power will hit $1 trillion by 2010.

Boasting investment professionals with global experience, Palladium invests in Hispanic-owned businesses that cater to Hispanic consumers in banking, retail, media, health care and business services.

"Palladium is unique because we have a horizontal focus, the ability to cross the spectrum of many industries," says Gary Nusbaum, a Palladium partner who has worked in Latin America, Asia and Europe. "The U.S. Hispanic market really does affect every industry."

Palladium's portfolio of companies includes:

•Todobebé, a multimedia firm in Miami for Spanish-speaking families with kids under 5. Todobebé offers TV and radio shows, a website, a magazine and a parenting guidebook called The Todobebé Book published by Harper Collins-Rayo.

Todobebé's Viva la Familia!, a new TV show on parenting co-hosted by actress and expectant mother Aracely Arambula and Todobebé co-founder Jeannette Kaplun, could be a crossover hit. In its debut on Univision on July 25, Viva la Familia! was the No. 1 U.S. network show — in English or Spanish — in the 10 p.m. prime-time slot among adults 18 to 34.

"We're seeing great demand and interest in reaching this market in a context that's family-oriented," says Gillian Sandler, CEO and co-founder of Todobebé.

•Castro Cheese, a Houston-based company founded by Mexican immigrant Maria Castro in the 1970s in her kitchen. Today, Castro Cheese is one of the biggest U.S. Hispanic cheese companies; its La Vaquita brand is sold to supermarkets, restaurants and hotels worldwide. Castro agreed to sell her company to Palladium after Alex Ventosa, a Palladium managing director born in Spain, spent a year gaining her trust and convincing her that Palladium would take good care of her family business. "Alex's accent … reminded her of her grandfather," Rodriguez says. "We were able to acquire that business, whereas other larger strategic buyers could not."

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