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Are Buyouts Making a Comeback in Spain, Portugal and Italy? - February 2014

The three Southern European countries whose economies suffered from the severe effects of the 2008 financial crisis could be about to return to pre-crash levels, with buyout-focused funds and deals regaining prominence. Spain, Portugal and Italy have seen the number of buyout funds closed focusing on these countries fall consistently since 2008, with firms lacking the confidence or desire to make large deals in the region and instead either focusing more on distressed deals or targeting  other geographic regions altogether. Fundraising figures for Europe-focused buyout vehicles fell consistently until there were no funds at all being raised in 2013 that were solely focused on the region. 

However, according to Preqin’s Funds in Market online service  as of February 2014 there are currently nine funds on the road exclusively focused on these countries, so things might be about to change. These funds are targeting a combined total of over €1bn in capital commitments. The largest of these funds in market is Portobello Capital Fund III, which is targeting a final close of €300mn. The fund invests in mid-market Spanish companies in a wide range of industries. If all of these funds were to close this year it would be the highest amount raised in the region since 2009, when five funds raised an aggregate total of just under €2bn.

Large private equity firms based outside Europe, such as Carlyle Group and Blackstone Group, are now looking at the region for deals. There was a 16% increase in deal activity in the region in 2013 compared to 2012, with the majority emanating from the US. Thirty-one percent of private equity-backed deals made in Spain, Portugal and Italy were by US-based investing firms. Out of the 69 private equity buyout-focused firms that are solely focused on the region, there is just over $5bn of estimated dry powder left to invest according to Preqin’s Fund Manager Profiles online service. This shows that there is still a lot of capital available for investment in the region, and it is likely that over the next few years there will be more buyout deals taking place.

Keywords: Buyout, private equity fundraising, dry powder, Europe