Portugal's export credentials lure GPs back

Amy King
28 February 2013

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Portugal's private equity activity may have been lacklustre in 2012, but numbers do not tell the whole story – recent developments could point to a brighter future for the country.

Portuguese private equity hit an all-time low in 2012. While most investors made a full retreat, those that remained stumbled through the economic turmoil and completed two transactions.

The year was a far cry from the glory days of 2008 when 14 transactions accounted for €1.6bn, largely thanks to the buyout of renewable energy utility firm Enersis. A consortium of GPs led by Magnum Capital paid in excess of €1bn for the asset, making it a record-breaking year for local private equity.

2013 is already an improvement on the 2012 nadir with €75m racked up thanks to N+1's acquisition of Portuguese plastic band manufacturer Probos from Explorer. February also saw Blackstone appoint Inaki Echave as managing director, with a primary focus on Spain and Portugal. The new hire was previously a partner at Iberian buyout firm Magnum Capital and a director in the pan-European buyout team at 3i. Are we witnessing the nascent signs of a Portuguese revival?

"The Blackstone appointment is very good news for Iberian private equity," suggests David Santos, the N+1 partner who led the Probos deal. The two GPs are no strangers, having teamed up to buy tin can manufacturer Mivisa from CVC for €900m in 2010. "The fact that they are reinforcing their team reflects our thinking that Iberian companies are good targets for private equity; they are increasingly competitive, they have very good exposure to Latin American growth – Portugal especially to Brazil – their prices are very good and they are now exporting more in international markets."

The latter point seems to be the real bonus of Portuguese firms. "It is not so much a question of sectors in Portugal, what is more important is export," explains Santos. "Portugal did not experience the boom in real estate and domestic consumption that Spain did in the last decade, so most Portuguese companies have had a sizable international revenue base for 10-15 years."

But despite the strong export opportunities, the market remains small and under-populated. Indeed this is part of the appeal for N+1, which has 10-15% of its portfolio in Portugal. "The market is small, but it is also less competitive with very few funds operating there," explains Santos. "When it comes to equity tickets in the €40-50m range, competition is scarce." With the recent appointment though, the GP might not cut such a lonely figure on the Portuguese landscape for much longer.