Aestival reflexions

01 August 2008

Tweet
Facebook
LinkedIn
Google plus
Send to

Southern Europe continues to see activity. However, levels are a far cry from the heady days of yesteryear. That said, prices are still readjusting - one just has to look at the failed Cavalli deal to be reminded of the changing paradigm in which the industry operates. In fact, large buyouts have been conspicuous by their absence this year, with only a handful of deals taking place in Italy and Spain worth more than EUR200m and none close to the EUR1bn benchmark. With the effects of the sub prime crisis still reverberating and banks continuing to announce drops in results, buyout houses have become more cautious about entering long and expensive due diligence processes. The question that hovers over our heads is whether the glints of light we are seeing announce the end of the tunnel or if indeed it is another train approaching - head on!

In fact, many buyout houses have changed track, turning their eyes to the mid-market, which, in being less needy of high leverage, is keeping things afloat. Similarly, expansion deals are offering large buyout houses opportunities: two of Italy's largest transactions recently have been the Weather Investments deal by Apax, TA Associates and Madison Dearborn Partners; and Technogym by Candover, both valued at EUR1bn.

Buyout houses are also taking advantage of distressed companies, with solidly established US turnaround funds making their way to Europe. In Spain, Nomura-backed Thesan Capital, a EUR200m fund, while N+1 Asesoramiento de Gestion now boasts a EUR300m vehicle Acquired at a symbolic value these companies are a gamble but a couple of successes can suffice given the initial investment was not as significant. Distressed companies also present the opportunity to buy in view of pursuing a bolt-on strategy as illustrated by the recent acquisition of Selective Beauty by Investindustrial in France.

Private investments in public equity (PIPE) deals are becoming an increasingly attractive option. Though perhaps less frequent in Southern Europe than in the French or Nordic markets, in recent months Ibersuizas took a 5% stake in Natraceutical. It could be that there IS light at the end of the tunnel.

Yours sincerely,

Francinia Protti-Alvarez

Editor, Southern Europe unquote"

Tel: +44 20 7004 7476

francinia.protti-alvarez@incisivemedia.com.