Conductor
TMG I Fund invested in Conductor, the largest Private Label credit card processor in Brazil. The company processes over 11 million credit cards for retailers in the main Brazilian regions. Advised since 2001 by the preceding company of TMG Capital, TMG I Fund has seen Conductor´s credit card processed, net income (R$), and EBITDA (R$) grow at average annual rates of 51%, 27% and 37%, respectively.
Identified opportunities and investment
Given the falling interest rates and expansion in credit in Brazil, TMG identified great potential for growth in the Brazilian credit card sector. TMG understood that the "Private Label" segment offered retailers a superior value proposition compared to co-branded cards (e.g., Visa or Mastercard), as the retailer can set specific sales promotions and implement faster innovations than they can with branded cards, while offering credit in partnership with a bank, thus gaining a competitive advantage over its competitors.
Investment thesis
On February 2001, TMG I PE Fund, advised by the company that preceded TMG Capital, acquired a controlling stake in Conductor, led the development of a sales channels and the technology platform itself (proprietary software), a very valuable asset for companies considering entering the sector in Brazil. In addition, this platform allows Conductor to efficiently meet different customers´ needs with security and scalability and makes it a leading player in the low-cost and high quality card processing market. Through this investment, TMG´s thesis on the Private Label segment was put to test and proven to be correct, with the number of "Private Label" cards now exceeding the number of co-branded cards.
On November 2014, Conductor was sold to Riverwood Capital. During the period with TMG the investor´s capital was multiplied by 81.5x in Brazilian Reais with an internal rate of return (IRR) of 44.5% per year. In US Dollars, the investment returned 65.4x the investor´s capital with an internal rate of return of 43.1% per year.
Learn more about the company at Conductor.com.br