Spanish private equity goes against the grain

The private equity community reaffirmed its interest in investing in Spain this year, as is evidenced by deal values having already reached a sizable £5.5bn. The figure, taken from data collected by unquote" between January and November, represents a 218% increase on 2009 statistics, suggesting that confidence and credit have both been more prevalent in recent months.

The data was of course significantly distorted by a deal closed by Luxembourg-based CVC Capital Partners, who are one of the most dominant players in the Spanish market. The private equity firm's acquisition of a 15.48% stake in toll road operator Abertis Infraestructuras at an enterprise value of €3bn constituted by far the largest transaction of the year. Yet even discounting this immense cash injection, 2010 values thus far are more than double last year's comparably humble total of £1.73bn. Deal volume also reflects the upward trend, with 80 investments being recorded since January, in contrast to 2009's meagre 58.

Spain's second biggest transaction was KKR's substantial secondary buyout of Alicante-based onshore helicopter service Inaer. The LBO giant walked away with the 49.9% stake previously owned by Southern European specialist Investindustrial in a deal valued at €700m, leaving the latter investor and the management with the remaining equity. Following closely in third position was CVC's two-part buyout of Galician cable company R. In a deal valued at €675m, including €225m of debt, the private equity manager acquired half of its eventual 70% stake in the firm in April, exercising its option to acquire the remainder in November. Also worth a mention are Permira's purchase of a significant majority stake in online travel agent eDreams for €275m and Magnum Capital Partners' acquisition of Centro Médico Teknon for €140.

Support services were the most popular sector for Spanish deals this year, seeing 10 private equity investments providing a cash boost of €360m for companies mainly in the Business Support Services segment. The most significant of these was the buyout of Madrid-based outsourcing business Grupo Multiasistencia by Ibersuizas for €117m. Software and computer services and food producers also received their fair share of attention, counting a total of seven deals each, with integrated entertainment company ONO's €200m equity injection from backers including Providence Private Partners, and MCH Private Equity's acquisition of canned fish producer Conservas Garavilla being the stand-out deals in these categories. Intensified interest in the areas of healthcare, pharmaceuticals and biotechnology perhaps provides a foretaste of investment hotspots for the coming months, as a survey of private equity professionals conducted by PricewaterhouseCoopers revealed these sectors to be among the most attractive in 2011. The majority – 55% – thought the energy sector has the strongest potential, while 41% were positive about the merits of an already flourishing support services segment.

Spain remains an attractive destination for many, though a lack of available leverage and unrealistic vendor-pricing continue to be obstacles to investment. José Maria Muñoz, founder and managing partner of MCH Private Equity, notes: "Spain is a sizeable economy that, although in a challenging situation from a macro perspective, continues to hold interesting opportunities on a micro level, particularly in the mid-market. There are a number of companies that are still doing well and have a growth story, both domestically and internationally."

The depressed economy has also brought opportunities from distressed sellers, whose pervasiveness provides an ideal market for portfolio companies pursuing consolidation strategies. "Downturns have, from a historical perspective, always represented the best context for doing attractive deals." Muñoz agrees, nevertheless, that now is clearly a time to proceed with caution, as the economic context remains uncertain. It is no coincidence, after all, that the majority of this year's deals were realised within Spain's most resilient industries.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Southern Europe
• Nordics
• France
• UK / Ireland
• Benelux
• DACH
• Spain
• KKR
• CVC Capital Partners
• Permira