Southern European buyout activity displayed further evidence of maturity across 2016 but could not match the highs reached in the previous year. Nevertheless, local market participants expect a strong 2017 despite political fragility. Amedeo Goria reports
As the end of the year draws near, activity figures on unquote” data confirm the degree of maturity reached by the buyout markets of southern Europe – but they also show that the strong recovery initiated in 2014 slowed down somewhat in 2016. During the first 11 months of the year, GPs inked 82 deals across the region, injecting €16bn into the market: this is short of the 94 deals worth a collective €20bn seen last year, but significantly above the 2009-2014 average.
With one month to go at the time of writing – and following listed GP Amundi's recent acquisition of Pioneer Investments from UniCredit for €3.5bn – Italy scored a combined €13bn in value across 50 deals in 2016, below the 58 transactions and €15bn invested in 2015. At the same time, 2016 witnessed the joint second highest aggregate value ever recorded on unquote” data for Italy – matching figures seen in 2006. It has also been the second busiest year for the country since the crisis, in volume terms.
The main driver behind those higher aggregate values is the return of large-cap deals, a trend that started in 2015 and was confirmed in 2016. Anna Gervasoni, CEO of Italian private equity association Aifi, noted this trend and the impact of international investors: “Italy showcased reliability to international investors in 2016. Against a fairly stable political backdrop, the country enjoyed a positive year, with international GPs totalling more than half of the buyout activity.”
Italy will have an additional challenge next year, given the political situation following the referendum" – Anna Gervasoni, Aifi
The largest buyouts of the year included Investindustrial’s acquisition of Artsana for €1.2bn EV in April 2016, as well as Advent International, Bain Capital and Clessidra Capital Partners’ purchase of Setefi and Intesa Sanpaolo Card for €1bn in May. Moreover, CVC bought Sisal for €1bn in June as well as Doc Generici for €660m in March.
However, much of Italian buyout activity was concentrated in the first seven months of the year. If we disregard the Pioneer deal that closed post-referendum, 86% of the aggregate value for 2016 was recorded before the end of July, with a sharp drop in the following months as global uncertainty increased and Italy approached its referendum in December.
“Italy will have an additional challenge next year, given the political situation following the referendum. The new government will need to provide the same level of reliability as we saw this year to allow GPs to match the highs reached in the past few months,” says Gervasoni.
Industrial Spain keeps pace
Over on the Iberian peninsula, the Spanish buyout market also mostly stuck to the recovery path carved in the aftermath of a very lacklustre 2013. In 2016, buyout activity in the country reached €3.6bn in value and 25 in volume as of early December, marking a light dip compared to the €4bn aggregate value and 29 deals seen in 2015. While perhaps disappointing for local practitioners keen on building momentum, the 2016 preliminary figures are double the €1.8bn aggregate value across 15 transactions seen in 2013.
Juan Luís Ramirez, vice-chair at Spanish PE association Ascri and founding partner at Portobello Capital, tells unquote": "2016 has been a good year. The light plunge in value is due to a lack of large deals, which affected the aggregate value deployed. Nonetheless, we witnessed a large number of mid-cap deals that boosted the overall activity.”
Ramirez also argues that political uncertainty did not affect buyout activity, but could have influenced fundraising. Looking at Ascri charts, Spain witnessed a dip in fundraising from €2.1bn in 2014 to €1.4bn in 2015, although 2016 started with €1.2bn raised during the first half. Ramirez says fundraising figures should be positive when looking at 2016 and going into next year, despite the fragile political environment that followed the designation of a new minority government after 10 months of uncertainty. Portobello is notably one of the Spanish mainstays expected to launch a new vehicle during H1 2017.
Nonetheless, Spain is also expected to undergo fiscal consolidation, and restructure its financial sector. The government will face the test of budget approval in the coming months – failure there could mean the return of all-too-familiar uncertainty that could weaken the country’s private equity activity.
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