PRIVATE EQUITY FROM THE PERSPECTIVE OF PORTFOLIO COMPANIES
Companies
In the last two decades, thousands of Spanish companies have found in private equity a key lever to finance growth and accelerate their transformation, diversification, and internationalization.
Evolution of deals by sector
844
494
2004
2023
2007
2011
2015
2019
Number of deals and average ticket in Mill €
22%
Tegnology & Telecom
36%
8,3
3.747
29%
Industry & Construction
8,1
11%
3.575
2.612
2.832
2.316
11%
Healthcare
20%
5,3
4,9
14%
Services & Entertainment
3,1
14%
Food & Beverage
13%
10%
5%
Energy
5%
2020-23
2012-15
2008-11
2004-07
2016-19
6%
Others
4%
Regarding the number of transactions and the volume invested per deal, the number of deals has increased, but, more importantly, the average ticket has doubled.
By sectors, we have seen a significant change during this period. Sectors such as Industry and F&B, wich in the past were among the favourites for private equity firms due to the stability of growth rates and cash flows, have lost weight over these two decades (jointly, from 40% to just over 20%). On the contrary, Technology and Telecom is the sector that has gained most weight in the investors portfolios (from 22% to 36%), driven by scalable business models and high growth potential. In addition to taht, Health sector has also outpaced others in weight, due to an increasing demand fueled by changes in consumer habits and a fragmented market. Together, these two sectors account for over 50% of investments in recent years. Other rapidly growing sectors in recent years include Agribusiness, Education, and Fitness.
OUR HISTORY
INVESTMENT STRATEGIES AND TYPES OF TRANSACTIONS
OTHER INVESTMENTS
2004
In a very young industry, with low competition and abundant financing, the investment case was quite straightforward: to invest at a low multiple, allow the investment to mature until EBITDA grew, and divest at a higher multiple. In these LBOs, high levels of leverage were often used, up to the maximum allowed by the lenders.
2009
With the liquidity crisis, there was an adjustment in valuations, and investors interest focused on identifying assets or sectors that had attractive valuations. The type of transaction changed radically, as many companies needed an injection of funds and there was no bank financing available. Therefore, restructuring projects, capital increases, and unleveraged purchases or financing alternatives to banks were proposed.
2014
Once the crisis was overcome, the industry matured and competition for deals increased. This forced private equityl funds to focus on improving their portfolio companies: developing growth potential, enhancing profitability, or managing working capital. Buyouts are back, with more moderate leverage levels in auction-type processes. In this context, investors are also interested in the portfolio companies of other investors, and there is an increase in secondary transactions between funds. With the pandemic and post-pandemic, companies face an unknown situation, and prioritize liquidity strategies and cost adjustments.
2020
In recent years, investment strategies have become more sophisticated. Buyouts remain the preferred formula, but always with a different component. For example, the creation of consolidation platforms to lead fragmented sectors or those sectors where scale is relevant. Similarly, we are beginning to see 'no deals' or restricted investment processes. Another example of this sophistication in the industry includes continuation funds or the sale of portfolios to secondary funds, mechanisms for portfolio companies that require longer maturation periods. It is also worth noting the greater prominence that management teams have acquired.
2024
HUMAN FACTOR
We have witnessed two decades of significant changes in Spain and around the world, which have required private equity funds and their portfolio companies to adapt to different market scenarios, at times enormously adverse. This process of transformation and continuous improvement would not have been possible without the decisive contribution of the human factor.
- First of all, the teams at private equity firms. During this time, we have seen emerge a new generation of professionals who have developed their careers into partners and directors at leading Spanish and international private equity firms.
- Secondly, the management teams of portfolio companies, which have grown in professionalism and competencies, and are, in many cases, the true leaders of investment projects. Private equity has been able to attract talent to manage its portfolio companies, with the appeal of differentiated projects that have significant potential and are very well compensated.
- Finally, the advisors who collaborate with portfolio companies, consultants increasingly specialized in private equity, with a differentiated approach tailored to the needs of investors and companies, who can be either external or internal (operating partners). These advisors have become true levers for execution and transformation in companies and a usual partner of private equity funds.
The venture capital industry in Spain is at a mature stage and faces a landscape full of challenges and opportunities, not devoid of uncertainties. In the coming years, we expect it to continue playing a fundamental role in supporting the business fabric, contributing to the consolidation and creation of leading companies, the development of new business models, the internationalization of Spanish producers, and, ultimately, creating value for its shareholders and for society. And at GB, we will be happy to continue collaborating and supporting management teams and professionals at management companies for the transformation of their portfolio companies.
NEWSLETTER 3 Final - ENG
GLOBAL GB CONSULTING
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Transcript
PRIVATE EQUITY FROM THE PERSPECTIVE OF PORTFOLIO COMPANIES
Companies
In the last two decades, thousands of Spanish companies have found in private equity a key lever to finance growth and accelerate their transformation, diversification, and internationalization.
Evolution of deals by sector
844
494
2004
2023
2007
2011
2015
2019
Number of deals and average ticket in Mill €
22%
Tegnology & Telecom
36%
8,3
3.747
29%
Industry & Construction
8,1
11%
3.575
2.612
2.832
2.316
11%
Healthcare
20%
5,3
4,9
14%
Services & Entertainment
3,1
14%
Food & Beverage
13%
10%
5%
Energy
5%
2020-23
2012-15
2008-11
2004-07
2016-19
6%
Others
4%
Regarding the number of transactions and the volume invested per deal, the number of deals has increased, but, more importantly, the average ticket has doubled.
By sectors, we have seen a significant change during this period. Sectors such as Industry and F&B, wich in the past were among the favourites for private equity firms due to the stability of growth rates and cash flows, have lost weight over these two decades (jointly, from 40% to just over 20%). On the contrary, Technology and Telecom is the sector that has gained most weight in the investors portfolios (from 22% to 36%), driven by scalable business models and high growth potential. In addition to taht, Health sector has also outpaced others in weight, due to an increasing demand fueled by changes in consumer habits and a fragmented market. Together, these two sectors account for over 50% of investments in recent years. Other rapidly growing sectors in recent years include Agribusiness, Education, and Fitness.
OUR HISTORY
INVESTMENT STRATEGIES AND TYPES OF TRANSACTIONS
OTHER INVESTMENTS
2004
In a very young industry, with low competition and abundant financing, the investment case was quite straightforward: to invest at a low multiple, allow the investment to mature until EBITDA grew, and divest at a higher multiple. In these LBOs, high levels of leverage were often used, up to the maximum allowed by the lenders.
2009
With the liquidity crisis, there was an adjustment in valuations, and investors interest focused on identifying assets or sectors that had attractive valuations. The type of transaction changed radically, as many companies needed an injection of funds and there was no bank financing available. Therefore, restructuring projects, capital increases, and unleveraged purchases or financing alternatives to banks were proposed.
2014
Once the crisis was overcome, the industry matured and competition for deals increased. This forced private equityl funds to focus on improving their portfolio companies: developing growth potential, enhancing profitability, or managing working capital. Buyouts are back, with more moderate leverage levels in auction-type processes. In this context, investors are also interested in the portfolio companies of other investors, and there is an increase in secondary transactions between funds. With the pandemic and post-pandemic, companies face an unknown situation, and prioritize liquidity strategies and cost adjustments.
2020
In recent years, investment strategies have become more sophisticated. Buyouts remain the preferred formula, but always with a different component. For example, the creation of consolidation platforms to lead fragmented sectors or those sectors where scale is relevant. Similarly, we are beginning to see 'no deals' or restricted investment processes. Another example of this sophistication in the industry includes continuation funds or the sale of portfolios to secondary funds, mechanisms for portfolio companies that require longer maturation periods. It is also worth noting the greater prominence that management teams have acquired.
2024
HUMAN FACTOR
We have witnessed two decades of significant changes in Spain and around the world, which have required private equity funds and their portfolio companies to adapt to different market scenarios, at times enormously adverse. This process of transformation and continuous improvement would not have been possible without the decisive contribution of the human factor.
The venture capital industry in Spain is at a mature stage and faces a landscape full of challenges and opportunities, not devoid of uncertainties. In the coming years, we expect it to continue playing a fundamental role in supporting the business fabric, contributing to the consolidation and creation of leading companies, the development of new business models, the internationalization of Spanish producers, and, ultimately, creating value for its shareholders and for society. And at GB, we will be happy to continue collaborating and supporting management teams and professionals at management companies for the transformation of their portfolio companies.