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You can thank private equity for this tuna farm. In November 2023, a group of investors purchased a majority stake in Baja Aqua Farms, a producer of high-quality sashimi-grade bluefin tuna in the Pacific Ocean off of Baja California, Mexico.
This is the only farm in the world that is being fed by a centralized feeder. So there is no other feeding vessel like this one in the world. So this was designed by us 100% in integration with a Mexican company and a Chilean company that was working on the engineering behind this. It's always looking for efficiencies. This vessel, what specifically does it do? It receives the sardines from the fishing vessel that then pumps on the fish holes. Then we grab those sardines. We put it in a big fish hole that we have here on the main deck. And then we move the sardines to different cages.
Baja's story began in 1999 with just a few pens, and when growing consumer demand was pushing the industry to the brink. If you look at the story of all these family businesses, which Baja was not really a family business, but it was really shaped as a family business. Manuel Vasquez, a veteran of Nestle and other food companies around the globe, arrived at Baja Aqua Farms in March of 2023 as the company's CEO.
"This fishery for a long time, it was seen with very bad eyes. I'm going back to 2010. Okay. And at that time, the fishery was overfished. There were some indicators that were saying that in general, all the countries that are fishing this, which is all the way from Japan to America and Mexico, they were abusing a little bit on the way that they were taking fish out of the water. Hence, it was in danger."
"We are not fishing small fish. So we are giving the time for the fish to reproduce several times before it gets caught. Right? And by definition, if you have an 85-kilo fish, you're talking about a fish that is more than 10 years old that has passed that process several times. And then you can be 100% sure that going forward that there will be more. And this is really a cycle that is virtuous and is reproducing going on and on and on."
According to NOAA, US commercial fishers harvested 368 metric tons of Pacific bluefin tuna in 2022, grossing more than $2.2 million in on-the-dock revenue, which accounts for 10% of total Pacific bluefin tuna landings that year. Baja is in the right place for the business. Japanese and Mexican vessels harvest the majority of the annual catch.
It starts with the actual fishing. There are two commonly used methods in the Pacific. Commercial and recreational fishers either use hook and line or purse seines. Baja opts to use purse seines, which are massive nets used to capture the fish but not lift them out of the water.
"We are now working with the fine-tunings. So we have to improve this vessel. We have to bring another vessel to the rest of the cages because we are capable to fit 24 here, but we have 40. We're going to have 50 in the next July. So we got to move fast because if we want to keep all the benefits that we've been gaining with this investment in the other cages, then we got to replicate this. So the next thing is to come with another grid, and then we have to bring another feeding vessel like this one, and that requires money."
"How much could you theoretically grow by double the size of what you have here?"
"Yes. Yes, we can go double."
Baja Aqua Farms hunts by air for schools of wild bluefin tuna in the Pacific, corrals them, and tows them to their farm pens off the coast of Ensenada, Mexico. There, they feed and tend to the fish's environment until they reach the ideal size for market, harvest them, and bring them to their processing facility on land. The fish are graded for quality and either cut or packed whole for shipment to customers.
Enter private equity. These are 175 to 200 lb a piece, and most restaurants in the country didn't actually need that much tuna at one time. So it restricted actually who the company could sell to.
Equity Group is the private equity investment arm of the Zel family, founded by billionaire investor Sam Zel, who passed away in 2023. It still invests Zel family assets, targeting not specific industries but certain features.
"I've run companies and I used to work at Coca-Cola, and I ran Budget Rent a Car, and I ran a software company, which I think is a little atypical for somebody as a president of an investment firm. I think it's relevant because what's going on in private equity right now is, as you know, there's lots of capital and there's lots of firms and a lot of competition. We cut across a lot of industries. So we're in healthcare, we're in agriculture, oil and gas, real estate. We have a company that sells software to the NSA. So, you name it, we cut across a lot of industries. We're usually looking for something about the industry and something about the company where there's a barrier or some type of structural advantage. So, what that makes us do is actually look across different sizes and in particular different industries."
In early 2023, rather unusually, a number of investors heard about the promise of tuna fishing and Baja Aqua Farms at the same time.
"There's a lot of strong growth in the bluefin tuna market. So, inherently, it's been growing for decades. And then on the supply side in the industry, it's a regulated global market. So, there are quotas internationally. You can't just go out and fish as much as you want. In each country, there are concessions. So, you have to have the right and a concession to actually grow the tuna. And then there's actually licenses that you need for the fishing boats and the captains. So, the demand's growing and the supply has got some controls around it. So, that's what we liked about the industry."
"The company has got a few structural advantages that we really appreciated, and they revolve around its proximity. It's based in Mexico, and this industry, as you can imagine, a tuna is heavy, right? 200 lb. And so shipping a tuna, especially air freight, is very, very expensive. So, our competitions in Japan and the Mediterranean and rural Mexico. So, the proximity to the US is a huge advantage for this company to ship fish from Mexico into the US. So that's one. The second one is the labor cost in Mexico is cheaper. So there's an advantage there. And then the third component is just the cost of feeding the tuna. So you feed them anchovies, you feed them sardines, and structurally it's been really a positive that where we fish for the tuna off the coast of Mexico is very close to where we fish for the sardines. So that lowers the feed cost."
Ki, Cultiva, Equity Group, and Castle Harland purchased a majority stake, leaving dry powder in their arsenal for ongoing support. They've also each sent an executive to Baja's board. The goal is essentially the same as any other private equity investment: grow the customer base, expand to new markets, and invest in new technology, equipment, and staff.
"We have the best product, and as we try to grow in the markets and as we have more supply now because the quota has increased, now the real challenge is to build those markets."
"We are weighing the fish over there. So after we trade it, then they're cutting the tail, and those guys over there, they are going to weigh the fish. So they are going to put again the scan with the weight, exact weight of the product before putting it into the box. So if it is going to Japan, it will go to one side, Brazil, Colombia, Dubai, the states in general, east coast, west coast, to make this an incredibly huge logistics operation."
"It is. It is so fresh. Well, yeah, it's fresh. It's so many different sizes. You're shipping it literally all over the world, and you have to, I guess, calibrate as each one comes in, which client it's going to."
"Yes, indeed. And then we are tracking over there, obviously, the distance from one point to the end point. So there's airports, connections, even the barcode that you see over there in the mouth of the fish is also ours. It's just a software that's illustrated inside. There is also a thermometer that is coming into the fish, and it's tracking the temperature of the fish from that point until you open the box."
"We will need to expand, and that's a challenge too. So it's a bit testing all the promises, as you can see, there's no machine that can actually replace this labor because of the specifications that we have in the product and want to have on the value proposition to our consumers. But at the end of the day, yeah, we will need to expand and get more people and more production lines in order to bring all this volume into the company."
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After nearly a year and a half with private equity on board, Baja is putting its new capital to work.
"We got an investment plan of around $5 million per year, which is going directly to fishing assets, to farming assets. Yeah. So, you got to keep things running, right? So you have maintenance capex, and then growing capex. We have a plan for $8 million this year, which is a new vessel that's going to be incorporated to the fishing fleet. And then we have some growth capex that's going to be here at the farm. You see around these grids, right? So those, there's a big bunch of cages there, 10 cages there, 10 cages there. All together in a solidarity grid system, and also we have some solitary systems which is holding one cage. So this year we're investing another million in putting another grid. So we're putting cages together like this one to facilitate the feeding."
Equity Group, along with the rest of the investor consortium, owns a majority stake in Baja. The goals of private equity in any investment are the same: grow the company and get a return on the investment. But EGI's timelines are different from what you would expect when you think of private equity.
"So, you mentioned it takes some time. You have to put capital into this business to get the returns you want. What does an exit look like for something like Baja Aqua Farms?"
"We don't put a time horizon on our investments. It's actually something that's a little different, I think, from most PE firms. Most of our money comes from Sam Zel and his family. So, we're a principal investor. And we sell when we've extracted as much value as we think we can. We really haven't even begun to penetrate the United States. There's new products that we can develop, and we're even going to explore maybe potentially other geographies to fish in. So, there's a lot of growth potential here. We've held companies for 5 years. We've held companies for 15. It's all just a function of how much more growth we think is out there."
Recently, private equity exits have taken longer and longer to execute. According to a 2025 McKinsey outlook for global private markets, average buyout hold times remain above the long-term average at 6.7 years. That compares to the average of 5.7 years over the past 20 years.
"Is there a way to get returns out of the company? Do you look for ways to get dividends of sorts in the lead-up to the exit?"
"Yeah. No, for sure. That is actually a really core part of what we do. Part of it is me being an operator is very focused on that. We do expect our companies to generate cash, and it's just kind of mandatory for us. Some of that is the investment thesis, understanding the type of business that we invest in. But absolutely, we're not going to hold something for 10 years and not take money out of the company. You know, maybe the first year or two the company net isn't generating cash because we're investing. We're putting in new technology, new people, all the things I've talked about. But absolutely, there's an expectation that we're dividending money out, and as the EBITDA grows, as the profits grow, we'll also every few years recap the business and take money out that way. You know, our expectation is four, five years in, if things are tracking, we've got all our money out of the investment that we've put in."
Equity Group's patient capital and holding times may be different from their PE peers, but one thing is the same: private equity ownership means big changes for the companies that they own.
"The company was selling in the US, but they were using one distributor mostly in Southern California. So, we've helped them roll out. Now, we have now, I think, eight distributors across the entire US. We're also not just using distributors, we're actually building a sales force going into the markets and selling to restaurants directly. So there's things like that that we help the company put in place, and that's going to create growth in and of itself, just that one point."
"We've gone from three countries when we bought the company, we're up to nine right now. And so we're expanding in these other geographies. They've got their own consumer demand. They've got their own regulatory environments. So there's a lot of different issues you have to work through as you roll into new countries."
"Another aspect which is enormous is when we bought the company and they sold tuna, they would actually sell the entire tuna. So if you're a restaurant and you wanted fresh bluefin tuna, you would have to buy the entire fish. These are 175 to 200 lb, you know, a piece. And most restaurants in the country didn't actually need that much tuna at one time. So it restricted actually who the company could sell to. So, we're working on a project right now where we're going to sell loins, which is just basically selling part of the tuna. And that's going to open up probably tenfold as many restaurants as we're selling to right now."
Chefs Franklin Becker and Robbie Cook of Coralas and 7 in New York source tuna from Japan and the east coast of the US. Their merchants use similar practices to Baja: no catching tuna in nets, no antibiotics, no hormones, native and natural feed, traceability, and eco-ima.
"You're a veteran in this industry. You've worked with lots of different kinds of meat, different types of fish. Can you just talk about working with bluefin tuna, about how special and different that is?"
"Bluefin tuna, it's so unique because it's just got the right amount of fat and the right amount of marbling throughout the structure. The fish is, it's just a beautiful fish at the end of the day. Robust in flavor, beautiful color. When you get down into the chutoro and the otoro, which is the medium fatty tuna and the fatty tuna, just melts in your mouth."
"What do you make about this current moment of the popularity of the fish itself?"
"You know, for a while it was overfished, and for a while people were kind of avoiding it, including myself. And thankfully, the populations have come back in a big way. They also do a process called ecoima, which is basically they stick a rod into its head, into its spinal cord, and they bleed it out that way, and that prevents all the fish from basically atrophying the wrong way and the meat becoming tough. So that kind of keeps it really nice."
Coral omic across and 7 are also examples of demands for cuts of fish, not the entire bluefin.
"If you're buying the whole fish, you're buying it because you have the storage space to handle it, which is a huge commitment all on its own. You're going to be able to turn it over. You have multiple restaurants. In my case, with a 12-seat omakase, it does not make sense."
Beyond the quality of fish, fueling growth at Baja Aqua Farms meant new boats, more sophisticated and scalable IT systems, net cleaning and other maintenance systems, a larger sales staff, and crucially, a new CEO.
"We start with trust and transparency. I mean, if we can't work together, that's going to be just a non-starter. We look for alignment. It doesn't mean we always agree, but can we all see true north? Can we all agree that the direction we're going in makes sense? So that's got to be there. And then look, leaders have to inspire. They have to hire good management themselves. Have they built a good organization? Have they built a good structure? Have they hired talented people? Do people like working there?"
New management comes with the territory when private equity comes to the scene. With a one-of-a-kind feeding system, efficiencies, new products, and markets, it's up to the CEO to manage and execute growth. His goal is to add a thousand more metric tons of tuna sales every year, from 4,000 in 2024 to 5,000 this year, and 6,000 the next.
"What do you think are some of the biggest changes that have been put in place since you and the investors have come in?"
"In order to have the same product with the same quality, always right, with the same timeline, with the same freshness, with the same everything, you need to have a process. And in order to scale a business, you need to have those processes all around the company, even from the way that we fish, the way that we grow the fish, till the way that we go and do the logistics to the final restaurant that we have."
"Grow, grow, grow, grow. Last year there was a significant change also because of all these things that I'm telling you and the way that we fish, and so they increased 50% the quota. That means that this year, for the first time in the last, I would say 15 years, we are allowed to go and fish 50% more of what this quota or this gap was allowing us to get. As a result of that, if you are bringing that supply into the market, you need to grow the market very responsibly. And for that, we created three different segments now, which is ready to cut, ready to serve, ready to eat, to have an investor group that believes in that vision and that is not only endorsing it but is facilitating the way to go there much more faster."
"What has been the biggest difference or surprise or change for you to work with a company that's private equity-backed?"
"That is always the smarter people in the room than me. Yeah. It's always challenging. Yes. And when I am with these diverse group of people and I hear all these ideas, there will always be things that I have not seen or comments that I have not heard or even ideas that I never thought of. But that is actually very exciting. On the downside, I told you what it was on the good part of it is that it's always keeping me at the edge and with all this adrenaline and trying obviously to improve as a person and also to try to grab all this knowledge that is there out."
"We don't take a fish out of the water unless he's already sold, which is very, very important for us."
"What markets do you want to expand into?"
"South America is very interesting, and we are moving forward very rapidly there. Middle East looks very interesting, and we want to also check that market. And specifically, the east coast of the United States is also very important to us. We are very strong on the west, but if you move east, then we start seeing some white spots. So now we changed that strategy. We actually cut the country in five different regions."
Almost exactly a year after the investor group acquired its stake, a new presidential administration won the White House, promising tariffs specifically aimed at products from Mexico. How do you think about those costs and who they go towards? Do you push that forward to the consumer? Do you push it forward to someone else?
"We're in a lot of industries that we hold companies for a while, and we see the environment change sometimes positively, sometimes negatively. So it could be the consumer. It could be we own a hospital chain and we owned it and managed it through COVID, so we dealt with that. That's a disruption. We own a warehouse company on the east coast ports, and we dealt with the Baltimore bridge collapse. So, you know, and we're in cyclical industries. We're in oil and gas. We're in real estate. We're in agriculture. So, we see most of our companies actually have a lot of ups and downs. Tariffs are just, in my mind, another type of headwind that a company potentially is going to face for some period of time."
"In terms of if there are tariffs and how we'll manage it, look, I think the answer is going to be it's the cost is going to get spread. We'll probably end up absorbing some, some will get passed along to the consumer. If you remember the value chain here, there's the consumer, there's the restaurant, there's the distributor, there's ourselves. So, there's a series of different ownership groups all along the value chain. And my guess is every part of the value chain absorbs part of that cost."
Tariffs aside, everyone along the food chain recognizes what matters to consumers in the marketplace.
"You can have a bad fish coming out of Japan the same way you can have a bad fish coming out of California or Spain or North Carolina. It's all comes back to the beginning. How was that fish caught? How was it killed? How was it preserved? What did they do? How long was it on the boat? All of these things matter. It comes down to authenticity. It also comes down to the fat content, and it just melts in your mouth, and it becomes this experience that's almost religious. I mean, that's it."
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