Enfoca: Private Equity in Peru Custom Case Solution & Analysis

Section 1: Evidence Brief

Financial Metrics

Fund II Investment: Enfoca invested approximately 450 million USD in its second fund across six primary portfolio companies (Exhibit 5).
Transaction Valuation: The proposed secondary transaction values the portfolio at approximately 950 million USD (Paragraph 4).
Macroeconomic Context: Peru experienced average GDP growth of 4.8 percent between 2006 and 2016, though growth slowed to 2.5 percent by 2017 (Exhibit 1).
Portfolio Composition: The fund includes major stakes in Auna (Healthcare), Celima (Construction materials), and Talma (Airport services). Auna and Oncosalud represent a significant portion of the total net asset value.
Local Market Liquidity: The Lima Stock Exchange (BVL) remains small with limited liquidity, making large-scale Initial Public Offerings difficult for private equity exits (Paragraph 12).

Operational Facts

Firm Structure: Enfoca was founded in 2006 by Jesus Zamora and Jorge Basadre. It manages multiple funds including Fund I, Fund II, and Fund III.
Fund II Status: The fund reached the end of its ten-year structural life in 2017, requiring a solution for Limited Partner (LP) liquidity.
Secondary Transaction Partners: Canada Pension Plan Investment Board (CPPIB) and Goldman Sachs Asset Management (GSAM) are the lead investors for the new vehicle (Paragraph 3).
Geography: Operations are concentrated in Peru, with expansion efforts for Auna into Colombia (Paragraph 28).

Stakeholder Positions

Jesus Zamora (Chairman): Seeks to avoid forced sales of high-performing assets in a depressed market. Believes the assets have significant growth potential that requires more time to realize.
Existing Limited Partners: Diverse group including Peruvian pension funds (AFPs) and international institutional investors. Many require immediate liquidity to satisfy their own internal mandates.
CPPIB and GSAM: Willing to provide 950 million USD but require a clean governance structure and a 10-year commitment for the new vehicle.
Management Teams: Portfolio company CEOs need stable long-term capital to execute multi-year expansion plans, particularly in healthcare and infrastructure.

Information Gaps

Specific EBITDA Multiples: The case does not provide the exact entry and exit EBITDA multiples for Celima or Talma.
LP Consent Thresholds: The specific percentage of LP approval required by the Fund II partnership agreement to authorize a GP-led secondary is not stated.
Clawback Provisions: Details regarding whether the GP must return previously distributed carried interest if the secondary valuation is lower than expected are missing.

Section 2: Strategic Analysis

Core Strategic Question

How can Enfoca provide immediate liquidity to Fund II investors without triggering a value-destructive fire sale of its most promising Peruvian assets in a shallow local capital market?

Structural Analysis

Market Constraint: The Peruvian exit environment is structurally limited. Trade sales to regional players are hampered by political uncertainty, and the local stock exchange lacks the depth to absorb billion-dollar listings.
Asset Maturity: Assets like Auna are in a capital-intensive growth phase. Exiting now would capture the base value but cede the significant upside from regional expansion into Colombia.
Incentive Alignment: A standard fund extension creates a zombie fund dynamic where the GP manages for fees rather than growth. A secondary transaction resets the clock and aligns the GP with new, long-term institutional capital.

Strategic Options

Execute GP-Led Secondary Transaction: Transfer Fund II assets into a new continuation vehicle funded by CPPIB and GSAM.
- Rationale: Provides immediate cash to existing LPs while retaining control of assets for another 5 to 10 years.
- Trade-offs: High complexity, significant legal costs, and potential conflict of interest regarding asset valuation.
- Resources: Requires sophisticated legal counsel and independent valuation experts.
Accelerated M&A Exit Program: Sell portfolio companies individually to strategic buyers or other private equity firms.
- Rationale: Clean break and traditional exit path.
- Trade-offs: Likely results in a 20 to 30 percent liquidity discount given the current Peruvian political climate (Odebrecht scandal impact).
- Resources: Heavy involvement of investment banks for multiple auction processes.
Structured Fund Extension: Request a 2-year extension from existing LPs to wait for a better market window.
- Rationale: Low execution cost and maintains the status quo.
- Trade-offs: Does not solve the fundamental liquidity need for AFPs and may frustrate LPs who want to rebalance their portfolios.
- Resources: Internal investor relations team.

Preliminary Recommendation

Enfoca should proceed with the 950 million USD GP-led secondary transaction. This path solves the liquidity mandate while preventing the premature disposal of Auna and Talma. It replaces fragmented, time-constrained LPs with two of the worlds most patient institutional investors, providing the stable capital base needed for regional expansion.

Section 3: Implementation Roadmap

Critical Path

Month 1: Valuation and Fairness Opinion: Engage an independent third-party auditor to provide a valuation that satisfies both exiting LPs and incoming investors. This is the foundation of the deal.
Month 2: LP Election Period: Provide existing LPs with a clear choice: roll their interest into the new fund or cash out at the secondary price. Transparency is vital to avoid litigation.
Month 3: Regulatory and Tax Structuring: Finalize the offshore vehicle structure to ensure tax efficiency for international investors while complying with Peruvian SMV regulations.
Month 4: Closing and Governance Transition: Formal transfer of assets and establishment of the new Investment Committee including representatives or observers from CPPIB and GSAM.

Key Constraints

Valuation Conflict: The GP is effectively both the buyer and the seller. Any perception of an unfair price will damage the Enfoca brand and lead to LP revolts.
Concentration Risk: The new vehicle will be heavily weighted toward healthcare. Any regulatory shift in the Peruvian health system will have a disproportionate impact on fund performance.

Risk-Adjusted Implementation Strategy

The plan assumes a 120-day closing window. However, the political volatility in Peru requires a contingency for delayed regulatory approvals. We will maintain a bridge financing facility to support Auna operations if the secondary closing slides into the next quarter. We will also implement a staggered management fee structure in the new vehicle to demonstrate GP commitment to long-term performance over short-term fee accumulation.

Section 4: Executive Review and BLUF

BLUF

Approve the 950 million USD GP-led secondary transaction. The Peruvian exit market is currently too shallow to support traditional M&A or IPO paths without significant value leakage. This transaction provides immediate liquidity to Fund II investors while securing stable, long-term capital from CPPIB and GSAM. By extending the holding period for Auna and Talma, Enfoca can capture the regional expansion upside that a premature sale would forfeit. The complexity of the deal is a necessary cost to avoid the structural limitations of the local capital market. Success depends on absolute transparency in the valuation process to mitigate inherent conflicts of interest.

Dangerous Assumption

The single most dangerous assumption is that the Peruvian macroeconomic environment will remain stable enough to support the aggressive growth projections of the healthcare assets. The analysis assumes that middle-class demand for private oncology and general health services is inelastic, even during periods of political turmoil or currency devaluation.

Unaddressed Risks

Key Man Risk: The transaction is heavily dependent on the reputation and relationships of Jesus Zamora. The new 10-year commitment lacks a formal succession plan for the GP leadership, which could worry incoming institutional partners if performance dips.
Regulatory Intervention: Auna operates in a sensitive sector. Increased government price controls on private healthcare or changes in the insurance law could compress margins regardless of operational efficiency.

Unconsidered Alternative

The team did not fully explore a partial liquidity event through a collateralized fund obligation (CFO). By issuing debt against the fund assets, Enfoca could have distributed cash to LPs while maintaining the existing fund structure and avoiding the high legal and administrative costs of a full GP-led secondary. This would have preserved the existing LP base while satisfying their immediate cash requirements.