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Recent Private Equity News Portugal: What You Need to Know

Private equity transactions have been on the rise in Portugal in recent years, with the industry experiencing significant growth and success. According to a report by Transactional Track Record (TTR), mergers and acquisitions (M&A), private equity (PE), and venture capital (VC) transactions in Portugal increased in both volume and value in 2021. The report revealed that there were 560 transactions in total, up 32% in volume and 2% in value from the previous year.

Despite the challenges posed by the COVID-19 pandemic, private equity firms in Portugal have continued to invest in various sectors of the economy. The Portuguese government has also implemented several measures to attract foreign investment and support the growth of the industry. For example, the Portuguese Recovery and Resilience Plan includes provisions to improve the business environment and promote innovation and entrepreneurship.

As the private equity industry in Portugal continues to evolve, it is important to stay up-to-date with the latest news and trends. This article will provide an overview of recent private equity news in Portugal, including notable transactions, industry developments, and future prospects.

Private Equity News Guide - Overview of Portugal

Portugal's private equity market has been growing steadily in recent years. According to the Private Equity Activity Report, Portuguese PE investment increased by 9.8% in 2019 to EUR 5.7 billion in assets under management.

There are currently 62 private equity and venture capital companies managing a total of 222 regulated funds in Portugal, according to the Portuguese Securities Market Commission (CMVM). Some of the most active sectors for private equity investment in Portugal include glass, ceramic, paper, plastic, wood-related companies, distribution and retail, and healthcare.

Caixa Capital is one of the most active private equity firms in Portugal. The firm has invested in a number of companies across various sectors, including technology, healthcare, and energy. Other notable private equity firms operating in Portugal include Magnum Capital, Explorer Investments, and ECS Capital.

Portugal does not commonly engage in deals involving consortium sponsors, but such a consortium may be formed when the target size requires private equity sponsors. For example, a consortium of three private equity pension fund investors purchased an 81% stake in Brisa, Portugal's largest highway toll operator. Private equity companies in Portugal also invest in renewable energy, real estate, and infrastructure projects.

Overall, the private equity sector in Portugal is expected to continue to grow in the coming years, with investors taking advantage of the country's favourable business environment and strategic location.

Impact of Covid-19 on Private Equity

The Covid-19 pandemic has had a significant impact on private equity globally, including in Portugal. The outbreak of the pandemic has led to a significant decline in deal activity in the private equity sector. According to Bain & Company, deal activity sank by half during the global financial crisis, but several factors could ease the fall this time around. Credit markets, meanwhile, have tightened up but haven't frozen completely as they did during the global financial crisis, when leveraged loan issuance sank by almost 80%.

The pandemic has also affected the volume of buyout and growth transactions in Portugal. 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% decline compared to the same period in 2020, according to IFLR.

The pandemic has also negatively affected M&A operations in Portugal. According to data from Transactional Track Record (TTR), M&A transactions in 2020 reached nearly €10.4 billion (approximately $12.6 billion). As a comparison, the 2019 figure had reached €13.4 billion, as reported by IFLR.

Despite the challenges posed by the pandemic, private equity firms in Portugal have demonstrated resilience and have adapted to the changing market conditions. They have implemented resilient business plans and have focused on sectors that have been less affected by the pandemic, such as technology and healthcare. As a result, some private equity firms have been able to identify attractive investment opportunities in these sectors, according to Chambers and Partners.

In summary, the Covid-19 pandemic has had a significant impact on private equity in Portugal, leading to a decline in deal activity and M&A transactions. However, private equity firms have demonstrated resilience and have adapted to the changing market conditions by implementing resilient business plans and focusing on less affected sectors.

Cross-Border Transactions and Investments

In recent years, Portugal has seen a significant increase in cross-border transactions and investments. According to a report by the Portuguese Chamber of Commerce, 67% of private equity investments in Portugal in 2022 had one or more overseas components, with a total of €1.6Bn posted that year for cross-border alone.

Spain and the United States were the countries that most invested in the Portuguese market, with 38 and 32 operations respectively over the past five years, in terms of transactional volume. France and the UK were also among the top investors in Portugal.

Foreign direct investment (FDI) has played a significant role in driving cross-border transactions in Portugal. The country's membership in the Eurozone has made it an attractive destination for investors seeking to expand their presence in the region.

Stakeholders in Portugal's private equity market have been working to attract more cross-border investments. This includes efforts to improve the country's regulatory framework and increase transparency in the market.

Despite uncertainties in the global economy, private equity investments in Portugal have continued to grow, with cross-border transactions playing a significant role in this growth. As private market fundamentals remain strong, Portugal is likely to continue to attract cross-border investments in the years to come.

Technology and AI in Private Equity

Private equity firms are increasingly turning to technology and AI to help them make better investment decisions. According to a study, the increased usage of Artificial Intelligence (AI) in Private Equity (PE) and Venture Capital (VC) will boost the sector's operational efficiency greatly and transform the ways in which partners perform their work.

The adoption of AI in private equity is expected to democratise the industry, as it will enable investors to access a pool of talented entrepreneurs who are often hindered by unconscious bias. AI can help investors identify promising startups and predict which ones are most likely to succeed.

In addition to AI, technology companies are also playing a key role in the private equity industry. Some of the biggest private equity firms have invested heavily in technology companies in recent years, with a particular focus on Silicon Valley startups.

Private equity firms are also using technology to improve their own operations, with many firms investing in software and other tools to help them manage their portfolios more effectively. This includes everything from project management software to data analytics tools.

Overall, the adoption of technology and AI in private equity is expected to continue to grow in the coming years, as firms look for new ways to stay competitive and make better investment decisions.

Regulations and Legal Aspects

Private equity transactions in Portugal are subject to various regulations and legal aspects. The practice of legal due diligence is common in private equity-driven transactions in Portugal, especially when private equity sponsors are involved. The due diligence process is usually conducted on a "by-exception" or "red flag" basis, except where there are key contracts or other legal instruments underlying the target business, in which case, the respective main legal terms are described.

In Portugal, the legal framework for private equity is mainly governed by the Portuguese Commercial Companies Code, which sets out the rules for the incorporation, governance, and liquidation of companies. Additionally, the Portuguese Securities Code regulates the offering and trading of securities, including shares issued by private equity funds.

Private equity sponsors and investors are subject to regulatory oversight by the Portuguese Securities Market Commission (CMVM). The CMVM is responsible for ensuring compliance with applicable securities laws and regulations, including disclosure requirements, and has the power to investigate and sanction violations.

Legal advice is critical in private equity transactions in Portugal. Experienced legal counsel can provide guidance on the legal and regulatory requirements, assist in conducting due diligence, and advise on the structuring of transactions to ensure compliance with applicable laws and regulations.

Corporate and M&A transactions, including mergers and restructurings, are also subject to Portuguese commercial law. Corporate restructuring transactions, such as spin-offs, mergers, and acquisitions, are subject to specific legal requirements, including the approval of shareholders and creditors.

In summary, private equity transactions in Portugal are subject to various regulations and legal aspects, including those related to commercial law, corporate and M&A transactions, mergers, restructurings, corporate restructuring, securities code, legal advice, and regulators. Private equity sponsors and investors should seek experienced legal counsel to navigate the legal and regulatory landscape and ensure compliance with applicable laws and regulations.

Market Stability and Economic Factors

Private equity investments in Portugal have been growing despite uncertainties, with significant interest in raising money and investing in the country. The private market fundamentals remain strong, and there has been a steady flow of capital into the market. The latest available data for private equity transactions indicate that disclosed deal value declined by 36% on a year-over-year basis, but deal numbers declined by only 8% Chambers and Partners.

The country's market stability and economic factors have contributed to this growth. Portugal's economy has been recovering, and the country has been experiencing steady economic growth in recent years. Low-interest rates have also been a driving factor in the growth of private equity investments. The European Central Bank's (ECB) monetary policy has been accommodative, with low-interest rates, which has made borrowing cheaper and more accessible for businesses and investors.

Inflation rates in Portugal have been relatively low, and the country has not experienced any significant inflationary pressures in recent years. This has helped to maintain market stability and has made it easier for businesses to plan and invest. Additionally, the country's liquidity has been healthy, with a well-functioning banking system that has been supportive of private equity investments.

Overall, Portugal's market stability and economic factors have been favourable for private equity investments. The country's strong fundamentals, low-interest rates, low inflation rates, and healthy liquidity have all contributed to the growth of the private equity market.

Investment in Infrastructure and Real Estate

Private equity investors have been showing an increasing interest in Portugal's infrastructure and real estate sectors. According to a report by Essential Business, one of the biggest investments undertaken in Portugal by a private equity entity over the past four years was the acquisition by Morgan Stanley Infrastructure Partners with a 49% share in Altice Portugal FTTH, previously held by MEO, a subsidiary of Altice, for €2.3Bn. This investment indicates the growing interest of private equity firms in Portugal's infrastructure sector.

In addition, the real estate sector is also attracting private equity investors. The report by Essential Business states that one of the most significant transactions in the real estate sector was the acquisition of 18 office buildings in Lisbon by the US-based fund Hines for €500m. The report also highlights that the residential property sector has been experiencing growth, with private equity firms investing in the construction of new housing developments.

Moreover, the Portuguese Chamber of Commerce notes that private equity investments in Portugal's real estate sector have been increasing steadily over the past few years. In 2022, there were 49 transactions with a mobilised capital of €1.6Bn, representing an increase of 32% in relation to the volume of operations and 60% in total value.

Private equity firms are attracted to Portugal's infrastructure and real estate sectors due to the country's favourable investment climate, including tax incentives, a skilled workforce, and a stable political environment. The government has also been implementing policies aimed at attracting foreign investment, including the introduction of a new golden visa scheme, which grants residency to non-EU citizens who invest in Portugal's real estate sector.

In conclusion, private equity investment in Portugal's infrastructure and real estate sectors has been increasing in recent years, and the trend is expected to continue. The country's favourable investment climate, coupled with government policies aimed at attracting foreign investment, makes Portugal an attractive destination for private equity firms looking to invest in these sectors.

Private Equity in Healthcare and Energy Sectors

Private equity firms are increasingly investing in the healthcare and energy sectors in Portugal. In the healthcare sector, private equity firms are looking for opportunities to invest in companies that provide medical services, medical equipment, and pharmaceuticals. Private equity firms are also investing in energy companies that are focused on renewable energy and energy efficiency.

Private equity firms are attracted to the healthcare sector due to the growing demand for medical services in Portugal. The country has an ageing population, and as a result, there is a growing demand for healthcare services. Private equity firms are investing in healthcare companies that provide services such as home care, rehabilitation services, and diagnostic services. Private equity firms are also investing in medical equipment companies that provide equipment such as MRI machines, CT scanners, and ultrasound machines.

In the energy sector, private equity firms are investing in companies that are focused on renewable energy and energy efficiency. Portugal has set ambitious targets for renewable energy, and private equity firms are investing in companies that are helping to achieve these targets. Private equity firms are investing in companies that provide solar energy, wind energy, and hydropower. Private equity firms are also investing in companies that provide energy efficiency solutions such as insulation, LED lighting, and smart thermostats.

Private equity firms are attracted to the healthcare and energy sectors in Portugal due to the growth potential and the opportunity to make a positive impact on society. Private equity firms are investing in companies that are making a difference in people's lives by providing healthcare services and renewable energy solutions.

Role of Banks and Institutional Investors

Banks and institutional investors play a crucial role in the private equity landscape in Portugal. They provide funding for private equity transactions and help to drive the growth of the private equity market in the country.

Banks are an important source of funding for private equity deals. They provide loans to private equity firms to finance acquisitions and other investments. In addition, banks also act as advisors to private equity firms, helping them to identify potential deals and providing due diligence services.

Institutional investors, such as pension funds and other large investors, are also important players in the private equity market in Portugal. They provide capital to private equity firms, helping them to raise funds for investments. In addition, institutional investors often have a long-term investment horizon, which is well-suited to the private equity asset class.

Fund raising is an important activity for private equity firms in Portugal, and institutional investors are key participants in this process. Private equity firms often target institutional investors for fundraising, as they have large pools of capital that can be deployed in private equity investments.

Asset managers also play a role in the private equity market in Portugal. They provide investment management services to institutional investors and other clients, helping them to invest in private equity funds. In addition, asset managers often have expertise in specific sectors or geographies, which can be valuable to private equity firms when evaluating potential investments.

Overall, banks and institutional investors play a critical role in the private equity market in Portugal. They provide funding, expertise, and other resources that are essential for the growth and success of the private equity industry in the country.

Venture Capital and Start-ups

Portugal's start-up scene has been rising in recent years, with a focus on enterprise and SaaS over consumer applications. This trend has attracted venture capital investments from both national and international investors.

According to TTR Data, investments from private equity companies in Portugal have enjoyed significant growth over the past four years. In 2022, there were 49 venture capital transactions with a mobilised capital of €1.6Bn, representing an increase of 32% in relation to the volume of operations and 60% in total value.

Portugal's small but growing venture capital market has been attracting investors from all over the world. For example, in 2017, two former executives from Caixa Capital, a fund belonging to State bank Caixa Geral de Depósitos, launched Portugal's first private and independent early-stage VC fund. Within two years, they had garnered €54 million to invest in mostly Portuguese technology start-ups.

Relevant venture capital transactions in Portugal 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, a leading provider of cybersecurity solutions for financial crime, led by buyout powerhouse KKR.

Portugal counts 62 private equity and venture capital companies managing a total of 222 regulated funds, according to the Portuguese Securities Market Commission (CMVM). This regulatory body is responsible for supervising and regulating the securities market in Portugal, ensuring that companies adhere to strict disclosure and transparency rules.

Overall, Portugal's start-up ecosystem is growing and attracting venture capital investments from all over the world. With a focus on enterprise and SaaS, Portugal's start-ups are poised to make a significant impact on the international stage.

Private Equity News Portugal