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Spanish private equity investment drops sharply in first half of the year

The value of Spanish private equity investments dropped sharply in the first half of the year to just E200m, according to new figures produced by Professor Marti Pellon of the Universidad Complutense de Madrid. Nearly E600m was invested in the same period last year, helping to make 2001 the second highest year on record for the country's private equity industry.

The report pinned some of the blame for the disappointing results on vendors' reluctance to lower their price expectations in the face of crumbling public markets.

The biggest investment was major domestic firm Mercapital's E40m investment in decoration group Ka, a fraction of the size of some of last year's big transactions.

The Spanish market was one of the strongest European performers last year, albeit from a much lower base than the major markets like the UK, France and Germany. It is also widely expected to provide some of the most attractive private equity investment opportunities over the next few years.

An AltAssets survey of more than 100 institutional investors in private equity published earlier this year - ‘The Limited Partner Perspective'- said Spain was viewed as the second most interesting market in Europe over the next five years. It was placed just behind Germany but comfortably ahead of more established markets like the UK and France.

Private equity activity across most of Europe was disappointing in the first half of this year but there have been some tentative signs that the pace of investment has picked up in recent weeks. Massive falls and sustained volatility in public markets appear to have finally eroded vendors' price expectations at the same time as intensifying the need for many corporates to restructure their operations.

Private equity firm CVC has recently been attached to two major transactions in Spain, the E577m purchase of Iberdrola's high tension electricity network and the proposed purchase of ferry operator Transmediterranea.

The medium and long-term rationale for investing in Spain is the high proportion of family-owned businesses and the expectation of a major wave of restructuring and consolidation.

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