DealMaker Q&A

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Aitor Cayero Barayazarra

TTR DealMaker Q&A with IMAP Albia Capital Director Aitor Cayero

Aitor Cayero Barayazarra
Aitor Cayero

Aitor Cayero is a CFA charterholder. He obtained his business administration degree from the Deusto University and continued his studies at Instituto de Empresa within its Program for Direction in Corporate Finance.

He began his career at PwC, where he remained for 5 years and oversaw projects for clients mainly within the Banking and Private Equity sector’s. In 2010, Aitor joined IMAP Albia Capital, and is currently an M&A Director. While at IMAP Albia Capital, he has been involved in over 30 M&A, valuation and refinancing projects, with an emphasis on cross-border engagements.

TTR: As an expert in Corporate Finance/M&A, how would you characterize M&A activity in Spain Year-to-date?

ACB: Despite an interannual slow-down in the M&A market in Q1 2019, presumably produced by some uncertainty looming in the overall macro landscape, our perception of the mid-market M&A is that activity is healthy and will continue to be so for the coming months. Specific circumstances for M&A activity are favorable: Spanish economic backdrop is robust, interest rates remain low and valuation spread between demand and supply in the M&A Mid Market is narrow. What is obvious, though, is that economy has been expanding for several quarters since the last crisis, and M&A activity has accompanied, so it does seem advisable for anyone thinking of entering the M&A market that he or she should do so while circumstances continue to be favorable.

TTR: IMAP Albia Capital advises on many sell-side mandates. Are these transactions typically structured as competitive processes? What level of appetite are you seeing in these targets?

ACB: In most cases, yes, processes are competitive. We have been involved in cases in which conversations have been exclusive from the beginning, but usually only when deal structure and terms are broadly agreed upon from the get-go and a framework of sufficient trust is established between buyer and seller, the latter a factor in which we as advisers frequently intervene.

Regarding appetite, demand really picks up when deals are above the €20 EV area. That’s where private equity usually comes into the picture, and, we all know what the dry powder status is in Spain and internationally; just check the last Bain and Co. Global Private Equity Report. So, sure, sell-sides that are sufficiently sizable, offering an attractive project and niche products, and with management teams willing to lead the project and reinvest, are hot products right now. 

TTR: Which funding resources are preferred by potential buyers seeking to acquire at present?

ACB: To be truthful, most buyers are still not that sophisticated in terms of funding sources: equity and basic amortizing bank loans basically cover most funding resources in Spain. Larger deals in which we have intervened have been structured using non-bank loans, such as mezzanine, unitranche, bullet structures, etc., currently being offered by debt funds, but this isn´t the typical Mid Market M&A deal in Spain today. We at IMAP Albia think the Spanish market will eventually end up resembling the US and UK markets, which are markets in which M&A transactions are mainly non-bank loan funded. Of course, we offer our buy-side clients the possibility of using more complex funding structures, and value creation that these structures add for their shareholders; some flatly dismiss the possibility, and others are open to at least exploring the possibility. It´s part of our role as advisers to let our clients know how to financially improve transaction structures.

TTR: To date, IMAP Albia Capital has advised on many industrial acquisitions. Which segments of the industrial sector are currently most attractive to investors?

ACB: I don´t see specific industrial sectors as being attractive as a whole. Some companies are in apparently unattractive industrial sectors, but are just in the right place within their value chain, with a niche and resilient product, and others are in trendy industrial sectors but don´t have the right elements in place to even be sustainable in the long term. Companies with competent management teams, a clear strategy and a powerful product offering will in most cases be successful, whether it´s one industry or the other.

However, I wouldn´t want to avoid directly answering your question, so I will say, just to name a few, that electronics, animal nutrition, industrial material additives, and non-combustion engine car part suppliers are four industries that are attracting attention.

TTR: As a local player, what are your thoughts on the current M&A market in Basque Country?

ACB: It is true that we originally started our activity in the Basque Country 15 years ago, and it is truly one of our main geographical markets. However, since joining our previous international organization 7 years ago, and especially since joining IMAP 3 years ago, our geographical reach in Spain is all over the country. IMAP is present in 39 countries with over 500 professional M&A advisers on our team. We currently have offices in Bilbao, Madrid and Barcelona, and most on-going mandates are nationwide.

Regarding the Basque Country, precisely on this topic we published an article in February of 2018, in which we indicated that Basque company’s offer skilled and productive workforces, high quality niche products, strong supplier networks, proximity of public administration, etc., which are all factors that make it the leading industrial hub in Spain. However, the one element Basque companies are improving, and need to continue improving, is size. They need to continue investing in other geographies, not only to become more attractive more financial and / or industrial investors, but also to guarantee long-term sustainability.

DealMaker Q&A

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TTR DealMaker Q&A with Rivero & Gustafson Abogados Partner Eliecer Pérez

Eliecer Pérez

TTR: As the responsible of Corporate /M&A area, how you Will describe the beginning of the year in Spain in mergers and acquisitions?

EP: Generally, the beginning of the new year, has started with the positive trend of 2018, we have seen a significant growth in the operations of M&A, specially from foreign investors that hope in Rivero&Gustafson to go on with its operations in Spain.


TTR: How attractive is the Spanish market against other international economies?

EP: Actually, Spain has a big attractive market for international investors. In 2018, our country finished in an historical position with the M&A operations.
In this sector, the trends are playing a very important paper because they are a sign of confidence for the investors. In this way, the fact that Spain is over other economies, even more solid, confirm that our market will continue to consolidate as one of the best options for M&A operations.


TTR: How can Brexit affect to our market?

EP: Great Britain is still being a high activity market in financial terms. In fact, is expected a period of retaining from investors, waiting for the new political situation to guarantee the same conditions to go on working.
Precisaly, during this expectation period, the Spanish market is a fine opportunity to those investors that, for the first time, are thinking to carry out transactions in our country.
So Brexit, can be an opportunity for uncommon investors in our country that start to make financial projections in Spain.


TTR: In which sector can we see a big interest for the national and international investors?

EP: No doubt, the real estate sector is growing and is a big attractive for the investors we are working with.
In other way, the technological sector is in a very interesting rapid growth phase. The investors are very interested in startups. In that way, in Spain we´ve got an important leader ambition in the young people, which is an important economic incentive for the area professionals.


TTR: Historically, the real estate sector is the most transactions sector in Spain, and 2019 is not an exception, what´s the reason for this?


EP: The real estate sector in Spain count with several factors that explain the wide business volume. The price of property in Prime locations in Madrid and Barcelona is still being very attractive. In comparison with other big European capitals. In addition, the profitability of that real estate inversions, in residential and commercial, are high due to the good functioning of renting market. Is convenience to considerer that our climatic conditions and quality of life, invite to particulars for inversions.


TTR: Into the real estate sector, which locations, besides Madrid and Barcelona, offer a big attractive for investors? Why?

EP: Everything relationed with seasonal tourism offers a big economic attractive. Actually, Costa del Sol and Islas Baleares, are two of the best options to every investors interested in a big profit margins. In other way, Islas Canarias, due to their magnifique climatic conditions, are being a great option for investors against other crowed locations.


Entrevista con Eliecer Pérez Socio Coordinador del Área Mercantil
en Rivero & Gustafson Abogados.

Eliecer Perez es licenciado en Derecho por la Universidad Autónoma (1994) y tiene un Máster en Asesoría Jurídica de Empresa por el Instituto de Empresa (1995). Se incorporó a Rivero & Gustafson Abogados en julio de 2009, pero ya estuvo trabajando 8 años (1997-2005) en el despacho con anterioridad. Fue director de la asesoría jurídica del grupo Cosmani y después director de la asesoría jurídica del RACE (Real Automóvil Club de España).


TTR: Como responsable del Área Mercantil de Rivero & Gustafson, ¿cómo definiría el comienzo de año en materia de fusiones y adquisiciones en España?


EP: En términos generales, podemos decir que el comienzo de año ha venido muy marcado por la tendencia positiva de 2018, hemos comprobado un aumento significativo de las operaciones de M&A, especialmente de inversores extranjeros que confían en Rivero & Gustafson para llevar a cabo sus operaciones en España.


TTR: ¿Cómo de atractivo resulta el mercado español respecto a otras economías internacionales?


EP: A día de hoy, España es un mercado de gran atractivo para inversores internacionales. En 2018, nuestro país acabó en una posición histórica en lo que respecta a operaciones de M&A. En este sector, las tendencias juegan un papel fundamental en tanto que son signo de confianza para los inversores. En este sentido, el hecho de que España esté por encima de otras economías, a priori, más sólidas no hace sino confirmar que
nuestro mercado seguirá consolidándose como una de las mejores opciones para realizar operaciones de M&A.


TTR: ¿De qué manera puede afectar el Brexit a nuestro mercado?


EP: Reino Unido sigue siendo un mercado con una tremenda actividad en términos financieros. Lo cierto es que se prevé un periodo temporal de contención por parte de los inversores, a la espera de que la nueva situación política pueda seguir garantizando las mismas condiciones con las que venían operando.

Precisamente, durante este periodo de expectación, el mercado español es una estupenda oportunidad para aquellos inversores que, por primera vez, se planteen realizar operaciones en nuestro país. De modo que, en definitiva, el Brexit puede suponer una oportunidad para que inversores no habituales en nuestro país comiencen a realizar proyecciones sobre futuros proyectos en España.

TTR: ¿En qué sectores se percibe un mayor interés por parte de inversores nacionales e internacionales?


EP: Sin duda alguna, el sector inmobiliario está en clara tendencia alcista, y constituye un gran atractivo para los inversores con los que trabajamos en Rivero & Gustafson. Por otro lado, el sector tecnológico está igualmente en una fase muy interesante de expansión. Las Startups copan gran parte del interés de los inversores. En este sentido, creo que en España hay un importante espíritu emprendedor por parte de muchos jóvenes, lo cual supone un importante estímulo económico para los profesionales del área.


TTR: Históricamente el sector inmobiliario es el que más operaciones contabiliza en España, y 2019 no es una excepción, ¿a qué se debe esta circunstancia?


EP: El sector inmobiliario en España cuenta con varios factores que explican su
amplio volumen de negocio. El precio de los inmuebles en las zonas Prime de Madrid y Barcelona sigue siendo muy atractivo en comparación con otras grandes capitales europeas.

Además, la rentabilidad de dichas inversiones mobiliarias, tanto en residencial como en comercial, es alta debido al buen funcionamiento del mercado de alquiler. Por último, conviene tener en cuenta que las condiciones de climáticas y de calidad de vida en España, invitan a la inversión de particulares en este sector.


TTR: Dentro del sector inmobiliario, ¿qué localizaciones diría usted, además de Madrid y Barcelona, que ofrecen un mayor atractivo para los inversores? ¿Por qué?


EP: Toda el área vinculada al turismo estacional ofrece siempre un gran atractivo económico. En la actualidad, la Costa del Sol e Islas Baleares son dos de las mejores opciones para cualquier inversor interesado en amplios márgenes de rentabilidad.

Por otro lado, las Islas Canarias, debido a sus magníficas condiciones climatológicas, se están presentando igualmente como una muy buena opción para cualquier inversor frente a otras zonas de España más masificadas.

DealMaker Q&A

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TTR Dealmaker Q&A with Garrigues Portugal Partners Susana Pimenta de Sousa and Mário Lino Dias

Garrigues Portugal Partners Susana Pimenta de Sousa and Mário Lino Dias spoke to TTR about what to expect from the Portuguese M&A and Private Equity markets in 2019 and the acquisition of Frutorra by Grefusa, chosen as Deal of the 4Q by TTR.


  • Mário Lino Dias

  • Susana Pimenta de Sousa

How would you assess the performance of the M&A market in Portugal in the first two months of 2019? Is there any scenario or trend that we should be aware for 2019?

The M&A market in Portugal in the first months of 2019 is in line with last year’s performance, although after a cool down period in the European transactions’ market in the second semester of 2018 it is advisable to assume that this “cooling” environment may probably hit the Portuguese market during the course of this year. In any case, it is always difficult to predict what will be its exact impact or if it is due to the relative uncertain environment that Europe is living nowadays.

 

What are the biggest constraints to M&A operations in Portugal today and how does it impact on the attractiveness of companies looking for investment, especially in regulated sectors such as financial, health and infrastructure concessions?

The recurrent main constraints are tax stability, predictability on timings and approvals from public authorities (particularly regulatory ones, when applicable) and uncertainties on future performance of Portuguese markets. In particular on healthcare where we may see some specific interests in Portugal coming from the other side of the Atlantic, the timing for reaction and approvals from the regulatory authority may be crucial to allow an effective investment, but if not expeditious investors will give up and look into other markets in Europe.

 

Regarding the performance of the Private Equity funds in Portugal, how does the Portuguese legislation figure in the face of international models and practices, in a scenario where most of the deals are not large enough to attract the major international Private Equity houses who have minimum tickets of much greater value?

The legal or regulatory framework tend not to be a blockage on the investment in Portugal. The funds have structures set up on different jurisdictions and the assessment made at the Portuguese level is mainly centered on the target legal and economic environment. In our experience the issue raised by the size of the transactions that brings Portugal out of the radar due to minimum ticket levels is balanced by the attractiveness of a less competitive transactional market (with still one to one negotiation available and less competitive bids), price with multiples still below other Southern European countries and ability to find well-managed companies with leading position on specific sectors.

When it comes to foreign investments made in Portuguese companies, Spain remains the country’s biggest investor, especially in the Real Estate and Health sectors. What are the current market conditions that help explain this preference and will it last?

Portugal is almost a natural choice for Spanish investors, as they normally think about building an Iberian strategy for positioning their companies and groups. The geographical proximity is also a factor for the choice, as it will involve fewer resources rather than an investment in other or culturally different jurisdictions. The Spanish economy is still performing very well and the perspectives are good for 2019, although some political uncertainties, so the preference for Portugal will last for sure!

In November 2018, the Spain-based nuts and cereal snacks producer Grefusa acquired 70% of the Portuguese Frutorra from the Fernandes Pimenta family, chosen as Deal of the 4Q by TTR. How did Garrigues land this mandate and what would you highlight in terms of importance and complexity in this deal?

Garrigues has landed the mandate due to the long-standing relationship with Grefusa as client for many years, particularly through our offices in Valencia. Frutorra has a leading position in the dry fruits market in Portugal. Therefore, its acquisition by Grefusa was important not only because it marked the entrance of Grefusa into the Portuguese market but also as an essential factor to meet their growth plans and to reinforce their position in the dry fruits sector. The complexity of the deal was mainly related to the fact that Grefusa was not acquiring 100% of the share capital, and therefore the parties needing to agree on the future terms of their relationship subject to a very short timeframe.

DealMaker Q&A

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Entrevista con Ínigo del Val, socio en Allen & Overy España.

Ínigo del Val, socio en Allen & Overy España

TTR – ¿Cómo definiría usted la actividad del mercado de M&A español una vez finalizado el año? ¿Cuáles considera que son los principales factores explicativos de los resultados obtenidos?

Creo que no digo nada que no se haya dicho al señalar que ha sido un año estupendo. Los motivos son conocidos por todos: fondos disponibles en los industriales y los inversores, disponibilidad de deuda a precios razonables y apetito inversor. A pesar de haber existido incertidumbres macro-políticas y económicas los factores antes mencionados han marcado el nivel de operaciones de M&A. por otro lado el tejido industrial español ha dado muestras de fortaleza y haber hecho las cosas bien después de la crisis, creo que el país ha sabido vender confianza.

TTR – Según los datos de TTR, de las 2.454 operaciones registradas en España durante el año 2018, 1.336 son domésticas, con un importe agregado de EUR 8.799m, y 1.118 son crossborder, con un importe agregado de EUR 107.113m. Estos datos pueden entenderse como una fortaleza, en la medida en que pueden verse como un indicador de la elevada interacción internacional de las empresas españolas, o como una debilidad, en la medida en que los datos del mercado doméstico podrían considerarse no demasiado elevados. ¿Cuál es su opinión?

Es un dato natural y no sorprendente. Somos una economía fuerte pero no enorme y nuestras empresas están ahora mucho más internacionalizadas que antes. Es difícil ver operaciones inlcuso de “mid-market” sin componente internacional; esto es bueno. Somos un país receptor de inversión y esto también es bueno.


TTR – Como experto en el segmento Private Equity, ¿considera usted que las cifras registradas en 2018 son positivas? ¿Por qué?

Lo son, indudablemente. La competencia por buenos activos es feroz, la subasta en operaciones incluso de tamaño moderado es la norma y se ven pocas operaciones bilaterales salvo que tengas ángulos especiales. El sector está sano, hemos vivido épocas malas y todos somos más precavidos pero por ese mismo motivo creo que estamos mejor preparados para un cambio de ciclo.


TTR – Varias firmas de Private Equity internacionales de renombre han redoblado su apuesta en 2018 por el sector inmobiliario español, como es el caso de Blackstone, Cerberus, Lone Star, etc… ¿Qué condiciones se dan en el sector para que sea tan demandado por este tipo de entidades internacionales? ¿Por qué las firmas de private equity españolas parecen tener un menor interés en el real estate español?

Los fondos que mencionas han estado muy ligados al sector inmobiliario desde hace años con las operaciones de recompra de carteras a los bancos, lo conocen y han creado equipos expertos en ese ámbito. Tras la crisis queda mucho ladrillo que sacar de los balances de los bancos y ellos son los que más experiencia tienen en hacerlo y considerar su rentabilidad. Creo que los fondos nacionales son más puro capital riesgo y tienen la ambición de invertir en sectores industriales. Tampoco hay muchos fondos nacionales interesados en infraestructuras. Los fondos nacionales tienen otras pretensiones en retornos y equipos preparados para otro tipo de activos; no es su estrategia de inversión real estate salvo las empresas (ya incluso cotizadas) que operan en el sector.


TTR – ¿Qué otros sectores diría usted que se perciben como los de mayor potencial por players nacionales e internacionales del segmento Private Equity?

En España las operaciones grandes seguirán girando en torno a energía  e infraestructuras ya que son gran parte de las grandes compañías que hay en España. Pharma, real estate, salud… todos esos sectores son muy atractivos en estos momentos.


TTR – ¿Cómo prevé que se desarrolle el año 2019 en términos de M&A y Private Equity en España?

Creo que será parecido a 2018 y está empezando muy fuerte. Los mercados de capitales están bastante parados y eso hará que una potencial desaceleración natural en private M&A se copense con la necesidad de invertir. Tengo más dudas para 2020.

DealMaker Q&A

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DealMaker Q&A with Helena Vaz Pinto, M&A partner at Vieira de Almeida.

According to Helena Vaz Pinto, 2018 has been a quite positive year for M&A in Portugal, even with a “structural problem of financing the Portuguese economy, with repercussions in the M&A market”.

How would you assess the performance of the M&A market in Portugal since the beginning of 2018?

The assessment of the Portuguese M&A market in 2018 is quite positive. It has shown clear signs of maturity. It is a market that is no longer driven by the privatizations of large companies (which seems to be a closed chapter), nor a market predominantly integrated by restructuring processes and distressed M&A.

There is abundant liquidity, in particular from the part of foreign investors, and in a context of low interest rates, the M&A market tends to become more dynamic.
Although the distressed M&A component is still relevant, there has been a significant flow of operations that do not qualify as such and that evidence the existence of a certain development of the Portuguese transactional market. Obviously, the size of the transactions is adjusted to the dimension of the national economy, thus focusing mainly on midcap companies.
There was a clear preponderance of some sectors: real estate, financial (banking and insurance) energy, real estate and infrastructure (transport, health, tourism, education, telecoms, etc.).

In your opinion, what are the biggest constraints to M&A operations in Portugal today?

There are a number of structural factors that affect the Portuguese business ecosystem and that impact on the attractiveness of companies for the purpose of enticing investment. Amongst those factors it is worth mentioning the (still) excessive indebtedness and the limitations and restrictions on access to funding in the national banking system and the limited use of alternative sources of financing, namely via the capital market.

There continues to be a structural problem of financing the Portuguese economy, with repercussions in the M&A market. In M&A operations there is a very significant prevalence of foreign investment (of the most diverse origins) that is funded outside the Portuguese financial system. Obviously, it is also the difficulty to obtain finance and capital that pushes Portuguese companies and groups to rationalize their structures, through the sale of assets, the formation of partnerships with third parties or the sale of businesses, generating a significant part of the Portuguese transactional market workflow.

On the other hand, the majority of transactions are not large enough to attract the major international Private Equity houses who have minimum tickets of much greater value.

From another perspective, the fact that the current governmental solution is centered in an alliance between the socialist minority Government and the leftwing parties, led to the approval in 2018 of new legislation imposing the need to obtain the prior permission of employees in the transfer of businesses structured as asset deals. Depending on how courts will interpret and apply such legislation, this may be a relevant obstacle that may jeopardize or restrict the election for such transactions.

Corporate transactions in regulated sectors (financial, health, infrastructure concessions) still involve a lot of bureaucracy and excessive delay in the authorization processes to which they are subject. The issue of excessive delays is particularly relevant in the health sector where we see transactions that take more than one year to be authorized by the competent authorities. This issue is also present in the transactions of distressed assets carried out in a judicial context.

The performance of Venture Capital funds in Portugal has had quite an interesting year in 2018. How do you see the scenario of Portuguese legislation in the face of international models and practices, both for investors and for those seeking funding?

There is a boom of start-ups, venture capital funds, incubators, accelerators and programs and policies to stimulate this type of investment.

There was, in fact, more activity in Venture Capital in 2018 that is based on an economic and political context of incentive to entrepreneurship and innovation. There is a boom of start-ups, venture capital funds, incubators, accelerators and programs and policies to stimulate this type of investment.

In 2018 Venture Capital investments have been on track, but it is particularly worth mentioning that there has been some successful exits this year (which are an essential element of the Venture Capital investment cycle) and which are breaking the stagnation experienced in recent years in the sector (the most striking illustration of this was the IPO Anglo-Portuguese unicorn Farfetch).

The Venture Capital industry in Portugal has always been and remains extremely open and sensitive to international trends, adhering to US-based models and practices. The existing Portuguese regulatory framework in not however adequate for Venture Capital investment, and the adoption of a specific legal regime for this type of investment would thus be highly recommended.

In fact, the Portuguese legislation – in particular, corporate law with respect to investment models and corporate governance -, is not in line with the Venture Capital Anglo-Saxon based legal system, and the design and structuring of a Venture Capital transaction usually requires some adjustments to cope with international standards and practices. These adjustments are not very well understood by foreign investors and may give room to a certain level of entropy.

In this context, we have seen the relocation of Portuguese companies to other jurisdictions with more “investor friendly” corporate and governance structures, such as the USA, but also other European jurisdictions such as the UK and Luxembourg.

Which transactions would you highlight in terms of importance and complexity this year, whether you have acted directly or with the participation of Vieira de Almeida?

On the team’s work in 2018, in terms of importance I would highlight the following transactions the sale of Alitce/PT’s telecommunication tower businesses in Portugal, creating the first telecommunication tower company in Portugal.

There were also a number of deals in the energy sector (solar and wind) a large number of restructuring transactions that always involve a certain level of complexity.

In terms of complexity, I would also like to highlight the closing of the sale to Mirova Core Infrastructure in the beginning of 2018 of the combined shareholding stakes of two PPP in the road sector in Madeira Island (VIAEXPRESSO and Vialitoral). The sale of the stakes in the two companies was made by two different groups of shareholders with different interests and positions (some sold the entire stake in each different company and some just sold part of its position and remained shareholders of the target companies). Although the sale of the stakes in each company were deal with by two separate agreements, they have been designed in terms that one transaction could not be completed without the other.

Finally, and with regard to the the financial sector, we would like to highlight the sale process launched by CGD (the Portuguese public bank) of its foreign subsidiaries in Spain and South Africa (still ongoing).