Spanish private equity's 2012 highlights

Amy King
10 January 2013

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While Spain faces deep economic problems, ranging from mass unemployment, a burst housing bubble and crippling public debts, its private equity industry has soldiered on, even attempting to improve its fortunes on the back of close ties to lucrative markets in South America. Here's unquote's picks of 2012.

N+1 and Mercapital merge – In July, Spanish investors N+1 Private Equity and Mercapital announced their intention to merge. N+1 Mercapital will manage €1.7bn, making it the largest investment firm in Spain. The N+1 Mercapital portfolio will include 26 companies with aggregate revenues of more than €3.8bn.

The newly formed GP will back medium-sized Spanish businesses looking to expand internationally, with a particular focus on expansion into Latin America.

The duo also announced plans to raise a €1bn fund once the merged company launches later this year, subject to regulatory approval; a very high target given the current economic climate in Spain. "We think it will be challenging," a source close to the situation told unquote". "But this merger will place N+1 Mercapital in a stronger place than going to the market separately."

The investors appear to be combining forces in a hostile market and the pairing is unsurprising given the similar evolution of the GPs' investment strategies. In the late 80s to early 90s, N+1 (then AB Asesores) and Mercapital raised the earliest Spanish private equity funds. Both firms initially focused on industrial investments, before adjusting their focus to services. With the onset of the financial crisis, they then looked to companies seeking international expansion. In addition, two senior players at N+1 were formerly employees of Mercapital and the two houses completed several co-investments over the years. This year will reveal whether or not the pair make a perfect match.

Bain buys Atento for €1bn – In October, Bain Capital agreed to the biggest Spanish deal of the year, with the €1.04bn acquisition of Atento, the call-centre unit of Spanish telecommunications giant Telefónica.

The deal included a deferred payment of €110m, alongside vendor financing of the same size provided by Telefónica. The sale was part of Telefónica's plans to raise cash through sales of its assets in an attempt to reduce its €175m debt. The company originally planned to sell the division via an IPO, but plans were scrapped in favour of a private equity-backed spinout.

Atento serves clients in the telecommunications, finance, healthcare, insurance, technology, retail, transport and public sectors with client management services. The Madrid-based firm covers 15 countries and employs around 152,000 members of staff. Revenues in 2011 amounted to €1.8bn, while operating income before depreciation and amortisation totaled €161m.

Amérigo network launches - In September, telecommunications giant Telefónica launched a €300m network of venture funds named Amérigo through its recently launched venture capital subsidiary Telefónica Digital Venture Capital.

The public-private network unites industrial partners and investors looking to back high-growth technology firms across the globe. Particular attention will be given to Spanish firms looking to expand into Latin America, as a means of harnessing international growth against a national backdrop of economic stagnation. Spain, Colombia, Chile and Brazil will be the initial target countries.

Active Venture Partners was selected as the first partner of the network. The VC recently held a final close of its second fund on €54m. The fund was renamed Amérigo Innvierte Spain Ventures FCR at the final closing.

Investindustrial in €439m PortAventura deal – In a reassuring move for international investors fearing a Spanish acquisition, Investindustrial proved its commitment to southern Europe with the acquisition of the remaining 50% of existing portfolio company PortAventura, a destination resort in Spain. The investment was the largest in the expansion category in Spain last year.

The GP completed the buyout through the holding company World Park Holdings, buying the shares from Criteria Caixa Holding, a Spanish listed vehicle controlled by savings bank La Caixa. The purchase price gave the company an enterprise value of €439m, with the GP widely reported to have paid around €120m for the remainder of the asset.

Investindustrial acquired a 50% stake in PortAventura from Criteria Caixa in 2009, in a deal that saw PortAventura split into two separate companies. The GP bought 50% of the business comprising the Caribe aquatic park, the management of four hotels including Hotel PortAventura, Caribe Resort, Gold River, El Paso and a congress centre.

Investindustrial and Trilantic finally bag Euskaltel – Telecommunications firms remained centre stage in October, when Investindustrial and Trilantic Capital Partners bought 48% of Basque telecommunications provider Euskaltel through the holding company International Cable Holdings. The deal included an equity injection of more than €200m and saw previous shareholders including Spanish bank KutxaBank, electric utilities firms Iberdrola and Endesa, business cooperative Mondragon and a number of Basque-government entities exit the firm. The acquisition brought an end to a long and winding journey to buy the firm.

The company was put up for sale in July after the Basque Country's Tribunal Superior de Justicia del País Vasco recently ratified a ruling by a Paris court demanding that Euskaltel pay Orange España €222m in damages following a long-running dispute regarding a joint venture. Apax Partners, CVC Capital Partners, Carlyle and Trilantic were the final four bidders for the firm, according to reports in the Spanish press.

In September, the bids made by private equity firms Apax and Trilantic were reported to have been blocked awaiting the results of the Basque Country elections. The elections could have resulted in a victory for either Partido Nacionalista Vasco or nationalist coalition Bildu, which could change negotiation terms since the local government owned 7.5% of Euskaltel. Trilantic was then widely reported to have had its final bid rejected by shareholders in October, due to disagreements over the company's valuation. The GP will no doubt have breathed a sigh of relief when the agreement was finally reached to buy the company alongside Investindustrial.