News Column

The 2001 HISPANIC BUSINESS 500® List Reveals Move Toward Mainstream Economy (CONTINUED…)

June 2001

Originally a general construction firm, MasTec now provides telecommunications infrastructure, mainly by laying fiber-optic cable, for telecommunications, cable TV, and Internet companies.

Perhaps the clearest evidence of Hispanic entrepreneurs' growing sophistication can be seen in the number of large companies on the HISPANIC BUSINESS 500 that have joined the mainstream via merger or acquisition. The process usually involves losing the 51-percent-Hispanic ownership requirement for inclusion on the directory, and it affects even some of the largest companies on the list.

M&A fever explains the disappearance of 1998's number 1 company, employee management firm The Vincam Group, which sold out to publicly traded Automatic Data Processing (ADP). The selling price was $300 million.

Vincam CEO Carlos Saladrigas, now an executive with ADP, believes Hispanic entrepreneurs can increase a company's asset value by creating "people-based competitive advantages" – that is, hiring and retaining talented people – and fostering a management culture open to innovation and change. Over time, people-based expertise becomes much harder for competitors to duplicate than innovations in products or services, he says.

The nascent sectors of the Hispanic economy – health care, technology, and finance – require such high capitalization that selling equity to non-Hispanics seems almost inevitable. "Every year you have to redesign yourself," says Teresa McBride, CEO of information technology contractor McBride & Associates in New Mexico. "You have to question your foundation, question why you do [what you do]. Does it bring value to the customers? … You have to evolve to bring them what they need."

Sometimes that means regrouping and raising capital to make the needed changes, she says. Her company ranked number 15 on last year's HISPANIC BUSINESS 500, but didn't participate on this year's list because of a restructuring. The CEO strongly believes Hispanic managers should do more external capital-raising, rather than retooling with their own money. That's because raising capital exposes the company and business plan to tough, probing questions that make it stronger in the long run. "It's an advantage, and it's a process that is not utilized as frequently as it can be in our market today," she comments.

Ms. McBride and many CEOs of the HISPANIC BUSINESS 500 face an uncertain future in government contracting. Although the public sector represents 16.4 percent of total revenues, up from 12.4 percent when HISPANIC BUSINESS started monitoring it in 1996, the growth rate for government revenues was only 7.2 percent, well below the 12.8 percent overall revenue growth rate.

Stephen Denlinger, CEO of the Latin American Management Association, says it's getting harder for Hispanic-owned companies to compete for government contracts because the agencies are bundling their purchases into larger contracts that small companies can't handle.

"Some agencies are engaging in wholesale bundling at the expense of small and minority-owned businesses, and it's having a very devastating effect," says Mr. Denlinger. "There are contract opportunities out there, but they're being packaged in larger units. It's harder for minority contractors to go after those units, so minority firms have to learn how to team up."

Another trend could be a reduction in contracts issued under the 8(a) program, Mr. Denlinger contends. He estimates that the value of 8(a) contracts in 2000 could drop from $6 billion to around $4.2 billion because agencies find it easier to use contracts under the pricing schedules set forth by the General Services Administration, which now cover a large cross-section of goods and services.

Today's HISPANIC BUSINESS 500 hosts a mix of persistent growth-oriented companies that have been on the directory since 1991 (see box, "Long-Term Winners") and aggressive, younger firms. The list's makeup points to higher, faster growth in the future. MasTec's Mr. Cintron foresees "tremendous opportunities for Hispanic companies to grow, and grow in all fields." Adds Mr. Perez: "Even if there's a slowdown, we're extremely well capitalized. I'm not on a [building] binge, so I can hold land. … We have enough work to take us over the short-term horizon."

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Source: HISPANIC BUSINESS magazine


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