Iberian private equity

Buyouts

Although consistent, buyout activity on the Iberian Peninsula has rarely reached levels seen in other European regions. The number of completed transactions hovered just under the 20 deals per year level up to 2005, when volume jumped to 43 deals worth EUR12bn. This surge is in line with activity spikes seen in other European markets, as abundant liquidity in the credit markets facilitated more and bigger transactions. Indeed, 2005 saw three deals in Spain breach the EUR1bn threshold - the delistings of Amadeus (EUR4.3bn) and Cortefiel (EUR1.44bn) as well as the EUR2.25bn buyout of telecommunications services provider Auna Tlc.

Overall deal value figures remained augmented in the following years as did activity, peaking at 48 buyouts in 2007. The credit crunch, however, has seen the market in 2009 return to pre-2005 levels and future expectations are subdued due to the prevailing bleak macroeconomic conditions.

Early-stage

The early-stage segment in Spain and Portugal followed a similar pattern as other European markets. Following the burst of the bubble in 2001, volume and value dropped significantly and remained at depressed levels for years to come with the exception of the false dawn of 2004. Notably, 2007 could mark the potential resurgence of the segment on the peninsula as early-stage activity surged to 23 transactions worth EUR80m with 2008 sustaining this trend. And while activity in 2009 has contracted in line with general market sentiment, having more established venture centres such as Barcelona and Madrid that are now home to a cluster of local investors has seen dealflow remain at a considerable level, giving rise to hope of positive developments in this segment for the future.

Expansion

The Iberian growth-capital market has remained stagnant following the collapse of the dotcom bubble. Most significantly, overall value dropped by almost 90% in 2001 to just over EUR400m and has since remained below the EUR1bn threshold. While the buyout segment saw a more substantial revival during the boom years of 2005-2007, expansion deals recorded only a modest increase with dealflow still lower than 2003 and 2004 levels. That said, with the buyout model hampered by leverage constraints and private equity houses focusing on the performance of existing portfolio companies in a challenging macroeconomic environment, one would expect an increase in dealflow based on acquisition financing transactions.

Buyouts by vendor type

Private and family-owned businesses have been a reliable source for private equity buyouts on the Iberian Peninsula providing more than half of the transactions for each year. Additionally, corporates disposing of non-core assets have further benefited dealflow, while secondary buyouts with their greater reliance on leverage, figured strongly at the height of the market between 2005-2007. Interestingly, the drop in buyout volume has been very modest in 2008 compared to other regions, mainly due to more readily available private vendors but also as a result of a substantial amount of companies being bought out of administration, indicated here by vendor type "other". Not surprisingly, secondary buyouts have dropped to pre-2005 levels as leverage remains a sought after commodity.

Deals by sector

While a good portion of private equity transactions in Spain and Portugal have consistently featured in the industrial and consumer sectors, other sectors have been more prominent at different times in the economic cycle. Technology deals for example figured strongly at the beginning of the decade and have once again become more prevalent in recent years, not least due to a resurgent venture segment. Additionally, transactions in the healthcare sector, generally considered to be more defensive, have increased recently as the economic downturn has made companies with stable long-term prospects more attractive. At the same time, highly cyclical sectors such as services have also seen rising dealflow as specialist investors are targeting businesses with certain levels of distress.

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• Southern Europe