Portugal has been feeling the repercussions of private equity’s (PE) spectacular success as an investment asset class during the past decade and in particular during the last few years.
On the demand side, the paradigm of low interest rates and capital shortfalls suffered by traditional Portuguese industrial groups have led the way for several high-profile buyouts of key assets and enterprises by international buyout shops, pension funds and other institutional investors; on the other hand venture capitalists, buoyed by schemes to deploy European structural and investment funds in ‘new economy’ ventures, are taking advantage of the country’s sophisticated start-up ecosystem.
As for the supply side, there has been a recent flurry of fund raising in the mid-market segment, focusing in particular in venture capital investments, technology companies and tourism and hospitality assets. Companies with resilient business plans proved to be particularly attractive.
However, the path was not strewn with roses. Deals took longer than usual to complete even though private equities had a ‘license to invest’ because of hesitations on the buy-side, more aggressive negotiations around asset valuation and consequently pricing arrangements (earn-outs, claw-back clauses, deferred prices), longer and more thorough due diligences, especially on the financial side and contract drafting misalignments on material adverse effect clauses, indemnities on Covid-19 related contingencies. Some deals also evolved from typical sale and purchase to cooperation models.
Going to the numbers and the deals, the volume of buyout and growth (i.e. more ‘traditional’ PE) transactions has decreased significantly compared to the previous year (the Covid-19 pandemic being often cited as the main reason why). Until November 2021, PE transactions represented a total volume of €2.169 billion, which represents a 68% drop compared to the same period in 2020 (Source: TTR – Iberian Market Monthly Report, November 2021).
Major PE deals in 2021 included the acquisition of a 25% minority stake in big-box retailer Sonae MC by CVC Capital Partners (with an implicit equity value of €2.4 billion), and the acquisition, by Ontario Teachers’ Pension Plan, of the US PE firm Carlyle Group’s majority stake in Logoplaste, one of the world's leading plastic packaging design and manufacturing companies for around €1 billion.
In venture capital, however, the market’s upward trajectory has not been interrupted by the pandemic (rather to the contrary) and transaction volume actually increased by 87.6% compared to 2020 levels, rising to €1.542 billion (Source: TTR – Iberian Market Monthly Report, November 2021).
Relevant venture capital transactions include Series B and Series C rounds (aggregate €168 million) of Sword Health (one of the fastest growing MedTech companies internationally) and the Series D investment (€200 million) in Feedzai (leading provider of cybersecurity solutions for financial crime) led by buyout powerhouse KKR.
Diana Ribeiro Duarte
Partner, Morais Leitão
E: drd@mlgts.pt
Pedro Capitão Barbosa
Principal associate, Morais Leitão
Clara Almeida
Associate, Morais Leitão
