By Maureen Flanagan
Founded in 1985, Vigo Remittance Corporation is among the largest electronic funds transfer firms in the world. In 2002, the company transferred some $2.5 billion, mostly from the United States to countries in Latin America and the Caribbean. Based in Sunrise, FL, the company has been consistently profitable, posting a compound annual revenue growth of over 30% and steadily increasing margins for the last three years. The company operates in over 33 countries around the world.
In a March 31, 2003 transaction, Vigo was purchased by Great Hill Partners, a Boston-based private equity firm that focuses on service providers in high growth sectors. Great Hill partnered with an industry savvy management team, headed by the company's new CEO, Mario Trujillo, to implement a seamless ownership transition. In support of this buyout, American Capital Strategies, Ltd. (Nasdaq: ACAS) provided a $50 million financing package.
"The electronic funds transfer industry is experiencing continued growth due to worldwide migration, even in the face of weak economic conditions and worldwide conflict. This is particularly pronounced in Latin America and the Caribbean where Vigo currently does most of its business. Vigo's near term growth will continue to accelerate as it builds its targeted agent network in the United States and forms new international correspondent relationships with key payment providers in its core markets," said Trujillo.
When founded in 1985, the company began operating in a heavily Brazilian and Portuguese section of Newark, NJ, for the purpose of sending remittances to Brazil. The business was an immediate success and Vigo steadily expanded into Hispanic neighborhoods throughout the country. Its service network has also expanded throughout Latin America and beyond.
Similar to its worldwide competitors, Vigo collects money in cash from customers through an extensive, heavily focused international agent network, typically grocery stores, convenience stores/bodegas or travel agencies. The funds are paid out to recipients via multiple correspondent relationships that include banks, post offices and retailers. The entire transaction usually takes from a few minutes to a few hours depending on the customer request and the availability in each country.
Vigo is highly competitive in the marketplace, where its services are considerably less expensive than larger money transfer companies. In an industry governed by increasingly complex laws and regulations, Vigo is one of the most compliant firms in the industry and maintains standards well above those set by state and federal governments. Customers rely on the company's trusted brand, convenient locations and fast, safe arrival of money to its destination.
"Vigo presents the consumer and its agents and correspondents with a far superior value proposition than larger competitors and a higher quality of service than the small niche players," said Robert Klein, ACAS Principal. "The management team plans to substantially increase Vigo's agent coverage in key U.S. Hispanic markets and grow its overall market share with its efficient, secure and competitively priced internationally targeted agent model."
Vigo joins American Capital's portfolio of more than 70 companies and investments exceeding $1.7 billion.
Click here for more information about ACAS portfolio companies.
In 2002, money remittances amounted to a $140 billion global market. Keeping pace with the growing Hispanic population in the United States, the U.S.-Latin American money transfer market has increased 8% to 10% annually during the past five years with similar growth rates projected through 2005. (Industry data indicates that 69% of the 15 million foreign-born Hispanic population remits money to relatives in their home country an average of eight times a year.) Mexico represents the vast majority of the market growth with 2002 remittances exceeding $10 billion. Mexico also has the most mature money transfer market in Latin America, with electronic transfers far outpacing the declining market for money orders, travelers' checks, and cash transfers. A recent report by the Inter-American Development Bank shows remittance payments to Latin America and the Caribbean topped $32 billion in 2002, up from $23 billion in 2001 and a 60% increase since 2000. Vigo is the second largest service provider in the Mexican market and is experiencing continued growth.
Remittances are greatly important to the economies of Latin American countries. The same IADB report finds that remittance payments from Latin Americans working abroad matched the total amount of direct foreign investment made by transnationals working in the region. The Mexican government estimates as many as 1.3 million Mexican homes - more than 1 in 10 families-depend on remittances as their primary source of income. In El Salvador, Dominican Republic and Ecuador, remittances make up as much as 10% of the GDP. With direct foreign investment expected to fall again this year, and remittances expected to keep rising, IADB economists predict that 2003 will mark the first time remittances surpass foreign investment in the region, making Latin America's exported labor its single greatest source of imported capital.
In rolling out its expansion strategy, the company's initial move will be increasingly to penetrate states in the U.S. where a large population of foreign born hispanic immigrants live. By adding new sales representatives and agents to these key states, the company is on a course to more than double its transactions, remitted funds and revenue in the next five years. Vigo is also considering a number of potential strategic alliances in the US and internationally to further augment its organic growth plans.
In addition, Vigo also plans to expand its relationships with correspondent institutions internationally, providing greater distribution, more convenient services and greater value added to its customers in each country.
As Vigo ramps up operations, the company is well positioned to make its high-quality, low-price family remittance service more widely available in Hispanic neighborhoods throughout the U.S. With the world shrinking and remittances flowing ever more freely across international borders, Vigo's money transfer wires will be humming in the years to come.
