Data room - Stuttering Spain

01 April 2009

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Unquote" data reveals a marked slowdown in the Spanish market. By Francinia Protti-Alvarez

Private equity activity in Spain has ground to a halt. The largest buyout recorded since Q3 2008 has been the acquisition of funerary service provider Memora by 3i, a EUR330m transaction. The deal is one of the few disposals of non-core assets by corporates to have completed; there are a few such deals still on the cards. The Spanish market, like much of Europe, has historically been prone to highs and lows, which have been more pronounced since 2007 (see chart 1).

Buyout bust

According to unquote" proprietary database Private Equity Insight, the gradual growth in buyout activity from 2001 peaked in 2005. Indeed, the year saw total deal value reach EUR12.35bn across 75 deals. (see charts 1 and 2). Two thirds of this total was made up by just five transactions: Mivisa (EUR520m), Recoletos (EUR940m), Amadeus (EUR4.3bn), Cortefiel (EUR1.44bn) and Auna TLC (EUR2.25bn). In comparison, 2006 was quiet, with deal value dropping by nearly 60% to EUR4.9bn across 63 transactions, while 2007 picked up but failed to reach 2005's peak. Buyout figures for 2008 however, saw a reversion to 2004 levels.

Early promise

The early-stage segment seems to be more constant with less dramatic changes. The slow growth seen between 2001 and 2004 was slightly reversed during 2005 and 2006. 2007 saw an increase with 23 deals completed for EUR79.7m and while 2008 saw a 15% drop in value it saw a slight increase in the volume (see chart 3). However, it remains uncertain whether this trend will be confirmed in 2009 as activity appears to have come to an almost definite halt across the various development stages.

From the flames

Times have changed; the mega-deals that we saw in the first have of the decade were something to reminisce. But more and more the industry is coming to terms with the fact that, at least for now, financial engineering and super high returns are a thing of the past. This will result in the inevitable disappearance of many private equity players; but from the ashes other phoenixes may rise.