INVESTMENT BANKS AND PRIVATE EQUITY FIRMS CIRCLE SPAIN

Argali Abogados

Argali Abogados

Spanish assets are back on the buy list of top international investment banks and private equity firms with deep pockets. Goldman Sachs, Blackstone and KKR are some of the big names eyeing acquisition opportunities, ready to dip into a war chest of nearly 12.7 billion euros which the venture capital industry has earmarked for Spain in 2013.

Some of these investors were sniffing around a year ago, hoping that the country’s banking sector shake-up would deliver a bonanza of prime real estate and distressed company assets at rock bottom prices, but their timing was premature.

Small and medium-sized enterprises (SMEs) struggling to survive the economic crisis were also on these investors’ radar, but most went home disappointed, unable to reach an agreement over valuations with potential sellers holding out for more.

In October 2012, KKR made an offer to buy bonds in Spanish hotel group NH Hoteles, with a view to possibly converting them to shares in the future. No deal was reached. NH Hoteles’ majority shareholder is nationalised lender Bankia. It has to divest a raft of assets, including stakes in the airline IAG and power company Iberdrola, to comply with European Union regulations after its state rescue.

Other banks’ industrial stakes are also expected to come under the hammer sooner rather than later, giving international investors an unprecedented opportunity to garner exposure to equities in the euro zone’s fourth-largest economy.

A LESS RISKY BUSINESS

In terms of venture capital deals, 2012 was one of the most sluggish periods for Spain over the last few years. So what has rekindled investor interest?

  • The risk factor attributed to Spanish assets has decreased as the eurozone debt crisis has eased.
  • The banking sector overhaul is well advanced, and the pipeline of distressed assets is opening up.
  • Real estate prices are beginning to bottom-out, particularly for prime office and retail properties, so now is a good time to buy.
  • More and more companies are deleveraging to cut debt and selling non-core assets. So there are more goodies up for grabs.
  • Buyers and sellers are gradually closing the valuation gap.

SO WHAT´S THE BEST BET?

Spain’s real estate and distribution sectors are most favoured by venture capital funds, and the acquisition targets are mainly SMEs, which represent 70-80 percent of the country’s business fabric. Distribution companies geared towards exports are particularly attractive for investors given the uptick in Spain’s exports in the past months. These are currently running 15 percent higher than pre-crisis levels and are expected to rise by 4.2 percent in 2013, topping the European average, according to the European Commission.

For more information, contact Argali Abogados or leave a comment below.

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