DealMaker Q&A

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TTR DealMaker Q&A with Ramón y Cajal Abogados Partner Amado Giménez Bono

Amado Giménez Bono is partner within the banking & finance department at Ramón y Cajal Abogados. His practice encompasses almost all aspects of finance transactions including debt restructuring and refinancing (over 100 deals) during his career, structured corporate finance, project finance (renewable energy, water, and infrastructure) LBOs and MBO´s. He regularly advises main Spain banks and financial institutions, as well as debt funds, advising also listed and unlisted companies/sponsors

TTR – In terms of company restructurings, what is the current situation and what are the prospects for the following months?

A.G.- It seems that the measures taken by Public Authorities in terms of elapsing insolvency  periods is letting companies take time to evaluate their situation prior to making a decision as to filing for bankruptcy or a pre-insolvency scheme or not. 

Despite such measures, there is still a number of companies struggling to survive that have more concerns than just the insolvency liability periods being suspended/extended, thus liquidity constraints derived from stopped activity and income are blocking their businesses.  Liquidity introduced via State Guarantee schemes seem to have been useful but there is a general feeling that such measures are only a starting point of a long and tough journey.

We anticipate a very heavy work load for the upcoming months in terms of restructuring deals.

TTR – What type of companies has been more affected by COVID-19?

A.G.- Tourism (in a wide sense, hostelry, restoration, etc.), automotive components, and in general all sectors that depend on a physical presence for trade to produce, such as retail for instance. 

TTR – How would you describe the measures taken by the Spanish Government to weather the business crisis caused by COVID-19? Do you think additional measures are needed?

A.G.- As described above, the measures taken so far seem to have given relief to the first wave, but a clear picture of the effects of the Covid-19 Pandemic seems yet to come; so it is difficult to evaluate the accuracy of such measures. 

State Guarantee schemes have proven to be useful in a first stage (although its implementation in the beginning was not as smooth as desired), but increasing debt levels may not be a solution itself in the long run for businesses that have been literally closed for weeks.

Let´s see how political negotiations take place and how the EU bazooka is channeled into the Spanish economy/companies.

TTR – Regarding the M&A sector, do you think the health crisis has generated business opportunities? Which sectors do you think are more interesting for financially strong investors?

A.G.- It seems that the green energy industry is going to take an important role in the post-pandemic Spanish M&A scheme, but I guess not the only one.  It will depend, at a first stage, whom will be the first one in put price to certain assets. 

DealMaker Q&A

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TTR DealMaker Q&A with Dentons Cardenas & Cardenas Partner Mauricio Borrero

Mauricio Borrero – Dentos Cardenas & Cardenas: Co-head of M&A and Corporate groups, and is the head of the Latin American and Caribbean region Corporate practice group.

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The M&A activity in 2020 is severely affected by the COVID-19 health crisis. How would you describe the situation of the M&A players in Colombia and LatAm at this time?

After coming nearly to a halt as a result of the Coronavirus, the M&A market is starting to recuperate. In general terms, traditional M&A players such as strategic buyers and private equity funds, are currently focusing on protecting the value of their own companies and assets rather than entering into new transactions. Nonetheless, those strategic buyers and funds that have available cash, are now starting to actively look for potential targets to acquire. This stems from the fact that the crisis has created a buyer’s market for M&A, with bargain prices and multiple investment opportunities. This is particularly evident for strong LatAm companies investing in other countries of the region, as well as acquisitions of companies with a strong reputation and global presence. With an increase in the negative financial effects of the crisis in local companies, especially in the leisure, transport, hospitality, and real estate sectors, it is likely that we will have a surge in distressed M&A transactions during the second semester of 2020 and Q1 and Q2 of 2021.

Which sectors would you say are more affected by this situation? Which ones do you think are most likely to recover more quickly?

Although this crisis has affected the entire economy, the most affected sectors are leisure, transportation, hospitality, and real estate. The oil and gas sector has also been affected by both COVID-19 and a reduction of the international prices of crude oil. We consider that the sectors that are more likely to recover quickly will be pharmaceutical, manufacturing, and technology.

What regulatory measures do you think could be deployed to unblock the current situation?

The most critical point is to re-open the economy, with a controlled opening of air travel. The Colombian government needs to increase the available funds for the different financial stimulus packages (i.e. Colombia Responde, Colombia Responde para Todos, etc.), to provide liquidity to local companies. The payment ecosystem needs to be enhanced by enabling new players and different options for the circulation of money and payment mechanisms different than traditional means such as cash. This will also serve to give access to credit and some level of formalization to more individuals and businesses. Defining what economic sectors are key in the “new dynamic” and promote them with subsidized funding and/or tax incentives.

What is the situation of the M&A market in Colombia compared to other nearby countries? Is this stagnation being lived in the same way in other countries in LatAm?

The current situation of the Colombian M&A Market is fairly similar to our peers in LatAm. We have been monitoring the situation with our M&A partners of the region and we have seen that they have all experienced a slowdown in the number and size of M&A deals. We have also evidenced that through the LatAm region there is an increased interest from strategic buyers and private equity sponsors to acquire companies and/or assets at a bargain price. Currently, Dentons Latin America and the Caribbean is participating in several intra-region transactions and international M&A deals involving more than three countries of the region.

What should we expect in the following months? Do you believe it is still possible to get back to normal in 2020?

We consider that the M&A market in Colombia will continue to grow during the following months, but it will not reach the number and size of deals of the previous years. These transactions will be more difficult and the entire process may take longer. All participants of the M&A market will face difficult times ahead when determining the fair market value of the asset/company being acquired, and securing financing at reasonable rates. Moreover, the social distancing rules will affect the negotiation process, as “all hands on deck” negotiations will be difficult to achieve. The time for performing a due diligence process will also be affected, as the collection of documents will become more difficult for the target company, given the limitations for their personnel to be physically present at their offices. We also consider that governmental approvals when required will take longer to be issued. An increase in distressed M&A deals is evident, and will probably be one of the drivers of the M&A market during the following 18 to 24 months. I believe we will only get back to normal during 2023.

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Versión en español

La actividad transaccional en 2020 está sin duda muy marcada por la crisis sanitaria del COVID-19, ¿cómo describiría la situación de los players del mercado transaccional en Colombia y de la región en estos momentos?

Después de casi detenerse como resultado del Coronavirus, el mercado de fusiones y adquisiciones está comenzando a recuperarse. En términos generales, los actores tradicionales de fusiones y adquisiciones, tales como compradores estratégicos y fondos de capital privado, se están centrando actualmente en proteger el valor de sus propias compañías y activos, en lugar de llevar a cabo nuevas transacciones. Sin embargo, los compradores estratégicos y fondos que tienen efectivo disponible, ahora están comenzando a buscar activamente posibles objetivos para adquirir. Esto se debe al hecho que la crisis ha creado un mercado de compradores para fusiones y adquisiciones, con precios reducidos y múltiples oportunidades de inversión. Esto es particularmente evidente para las compañías latinoamericanas que invierten en otros países de la región, así como para las adquisiciones de compañías con una sólida reputación y presencia global. Con un aumento en los efectos negativos financieros de la crisis en las empresas locales, especialmente en los sectores de entretenimiento, transporte, hotelería e inmobiliario, es probable que tengamos un aumento en las transacciones de “distressed M&A” durante el segundo semestre de 2020 y los dos primeros trimestres de 2021.

¿Qué sectores diría usted que se han visto más afectados por esta situación? ¿Cuáles experimentarán una recuperación más rápida?

Aunque esta crisis ha afectado a toda la economía, los sectores más afectados son el de entretenimiento, transporte, hotelero e inmobiliario. El sector del petróleo y el gas también se ha visto afectado tanto por COVID-19 como por la reducción de los precios internacionales del petróleo crudo.

¿Qué medidas cree que podrían tomarse a nivel regulatorio para desatascar esta paralización?

El punto más crítico es reabrir la economía, con una apertura controlada de los viajes aéreos. El gobierno colombiano necesita aumentar los fondos disponibles para los diferentes paquetes de estímulo financiero (es decir, Colombia Responde, Colombia Responde para Todos, etc.), para proporcionar liquidez a las empresas locales. El ecosistema de pagos debe mejorarse permitiendo nuevos jugadores y diferentes opciones para la circulación de dinero y mecanismos de pago diferentes a los medios tradicionales como el efectivo. Esto también servirá para dar acceso al crédito y cierto nivel de formalización a más individuos y empresas. Definir qué sectores económicos son clave en la “nueva dinámica” y promoverlos con financiamiento subsidiado y/o incentivos tributarios.

¿En qué situación se encuentra Colombia respecto a la actividad transaccional de otros países de su entorno? ¿Esta paralización que vivimos se traslada de igual manera a otros países de América Latina?

La situación actual del mercado colombiano de fusiones y adquisiciones es bastante similar a la de nuestros pares en LatAm. Hemos estado monitoreando la situación con nuestros socios de M&A de la región y hemos visto que todos han experimentado una desaceleración en el número y tamaño de las transacciones de M&A. También hemos evidenciado que en la región de LatAm hay un mayor interés de compradores estratégicos y sponsors de capital privado para adquirir empresas y/o activos a un precio reducido. Actualmente, Dentons Latinoamérica y el Caribe está participando en varias transacciones intrarregionales y acuerdos internacionales de fusiones y adquisiciones que involucran a más de tres países de la región.

¿Qué cabe esperar que suceda en los próximos meses? ¿cree usted que se podrá recuperar la normalidad en 2020?

Consideramos que el mercado de fusiones y adquisiciones en Colombia continuará creciendo durante los próximos meses, pero no alcanzará la cantidad y el tamaño de las transacciones de los años anteriores. Estas transacciones serán más difíciles y puede que todo el proceso dure más tiempo. Todos los participantes en el mercado de fusiones y adquisiciones enfrentarán tiempos difíciles al determinar el valor justo de mercado del activo/empresa que se adquiere y asegurar el financiamiento a tasas razonables. Además, las reglas de distanciamiento social afectarán el proceso de negociación, ya que las negociaciones de “todas las partes sentadas en la misma mesa” serán difíciles de lograr. El tiempo para realizar un proceso de debida diligencia también se verá afectado, ya que la recopilación de documentos será más difícil para el target, dadas las limitaciones para que su personal esté físicamente presente en sus oficinas. También consideramos que las aprobaciones gubernamentales demorarán más en emitirse cuando sean necesarias. Se evidencia un aumento en las transacciones de “distressed M&A”, y probablemente este será uno de los motores del mercado de M&A durante los próximos 18 a 24 meses. Creo que sólo volveremos a la normalidad durante 2023.

DealMaker Q&A

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TTR DealMaker Q&A with IMAP Albia Capital Partner Alejandro Azcona

Alejandro Azcona – IMAP Albia Capital: Graduate in Economic and Business Sciences, specialising in finance, CIA from the IIA, Florida. He started his career at ARTHUR ANDERSEN and then he joined the IBERDROLA GROUP. In 2004, as a result of his enterpreneurial spirit, he founded IMAP – Albia Capital and since then, he has executed more than 25 sell-side, buy-side or capital raising projects and has participated in 30 Valuation, Restructuring, Refinancing and Feasibility Plans, especially in energy and renewable energy, manufacturing, automotive, food and wine, services and Private Equity.

TTR – How would you describe the current situation of the Spanish M&A market? Have we already overcome the uncertainty caused by the COVID-19 health crisis?

A. A. – The M&A market is currently going through a period of adjustment to the new situation that has arisen as a consequence of the health emergency that we have all had to live through. 

Certain sectors that have emerged stronger out of this crisis, or that have been less affected by it, such as technology, healthcare, or food, remain active in M&A terms, their market and profitability have grown, and their corporate dynamics are in some cases even better than before. 

In other sectors, the ongoing uncertainty that still remains regarding the size of the residual market that businesses will have left makes standard M&A transactions difficult, although we believe that this will be an incentive for business-consolidation transactions in the medium term. 

TTR – Is there investor appetite in the market at the moment? Would you say market opportunities have arisen from the standstill caused by COVID-19?

A. A. – Yes, there is an appetite for investment and there is liquidity in the market, although positions have changed compared to just before the crisis. 

The risk inherent to the current situation has significantly increased, and this means that the judgments made by buyers are more conservative, but likewise sellers are also more sensitive to the risk-exposure of their businesses, both because of what we have been through and because of the uncertainty in the short to medium term. 

This context gives rise to interesting investment opportunities, and as we were saying earlier, there is a clear opportunity to boost sectoral consolidations that improve the competitiveness of the business fabric while at the same time generating attractive and profitable projects. 

TTR – Is it a good moment in terms of access to financing? 

A. A. – The promotion by various government bodies of a range of different instruments to ensure that businesses can retain liquidity, with guarantees of different kinds for lending institutions, has given rise to a period when it has been relatively simple to secure long-term financing under favourable conditions. 

The lesson we learned during the 2008 – 2012 period has meant that the majority of businesses are building up liquidity that will allow them to face the short-term with greater security. 

The situation may change in the coming months, when the government-backed instruments start to taper away and the balance sheets and trading accounts of the financial institutions start to feel the impact of the crisis. When this happens, it is quite likely that credit will dry up significantly, and as such this is clearly the time to access borrowing. 

TTR – Which regulatory measures do you think would help the Spanish M&A market recover more quickly?

A. A. – In order for the M&A market to recover more quickly, the most important thing is for businesses to recover quickly, for the outlook to be good, and for them to have investment capacity and the ambition to grow and develop. Therefore, all regulatory aspects that support the flexibility of business costs in order to adapt to the new market and support the recovery and the improvement of business prospects will make a significant contribution to boosting M&A. 

TTR – How do you expect the M&A market to behave in 2H20 and in 2021?

A. A. – For the remainder of 2020 we are expecting – and are indeed already seeing – an active market in technology-related transactions, both in development projects and in the acquisition of technology by large corporations and in markets that have been winners in the situation we have endured. We are also expecting a volume of opportunistic transactions borne out of the uncertainty, as well as consolidation processes by competitors within the same sector. For 2021 we are expecting an overall economic recovery, which for those companies that have adapted well to the new situation will improve their prospects and their profitability, and will lead to a progressive normalization of the market and of M&A transaction

DealMaker Q&A

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TTR DealMaker Q&A with Rivero & Gustafson Abogados Partner John R. Gustafson

John R. Gustafson – Rivero & Gustafson Abogados: Corporate and Commercial Law, Litigation, Arbitration and New Technologies.

Graduated at the San Pablo C.E.U./Universidad Complutense (Madrid, 1988), John initiated his professional career at the Public Defender’s Office of Albany, New York, and later joined Baker & McKenzie (1991).

TTR – The M&A activity in 2020 is severely affected by the COVID-19 health crisis. How would you describe the situation of the M&A players in Spain at this time?

J. R. G. – Undoubtedly , the current backdrop is not the most conducive to the development and conclusion of operations in the transaction sector. Alongside the adverse consequences of the actual crisis and the uncertainty of its evolution in the short and medium-term, we must also add the purely logistical issues inherent in lockdown itself. With few exceptions, praise must be given for the difficulty that closing transactions entails in this context, the outlook suggests that most transactions are undergoing a sort of hibernation period and waiting for the “storm to pass”.

TTR – Which sectors would you say are more affected by this situation? Which ones do you think are most likely to recover more quickly?

J. R. G. – The most part of all sectors are feeling the effects to a greater or lesser extent. The service sector has a major bearing on the Spanish economy and is being one of the most severely punished, notably in the spheres of transport, hostelry, tourism, leisure and entertainment in which it has been necessary to cease trading under the current circumstances. These are the very sectors that should experience a swifter recovery due partly to having fallen so sharply. Likewise, the healthcare, pharmaceutical, medical and geriatric treatments spheres will awaken the interests of investors to tackle further outbreaks and remedy weaknesses identified during the lowest points of the epidemic.

TTR – What regulatory measures do you think could be deployed to unblock the current situation?

J. R. G. – All aspects that involve boosting the economic flow of investment and endowing flexibility to the markets will lead to benefits in terms of recovery. Admittedly, now is not the time to raise taxes and legislate towards more rigidity in the employment market, moreover the opposite is true. Backing must be given to investment, research and development, along with reforms.

TTR – What is the situation of the M&A market in Spain compared to other nearby countries? Is this stagnation being lived in the same way in other countries?

J. R. G. – Our insight is that activity in Europe and North America is on a very similar footing. The million-dollar question is whether once the progressive de- escalation comes into being, will we be able to advance at the same pace as those best prepared for the future?

TTR – What should we expect in the following months? Do you believe it is still possible to get back to normal in 2020?

J. R. G. – A situation of major downturn in activity is often followed by another of intense activity. I believe that in this case the recovery of activities will take place more progressively. There will be operators who seek out opportunities that will be undoubtedly the result of this crisis, yet the general economic environment will remain troublesome. Everything makes us think that we will have to coexist with this scenario for a while and adapt to the circumstances. It is somewhat difficult to contemplate presently the return to what we have understood as being normal until mid-March, yet that is the direction in which we must move.

Versión en español

John R. Gustafson – Rivero & Gustafson Abogados: Derecho Mercantil, Procesal, Arbitraje y Nuevas Tecnologías.

Licenciado en Derecho por la Universidad San Pablo C.E.U./Universidad Complutense de Madrid (1988) y Doctorando en Derecho Mercantil por la Universidad Autónoma de Madrid, comenzó su andadura profesional en la Oficina del Defensor Público de Albany, Nueva York y después se incorporó a Baker & McKenzie (1991). Ha sido profesor de Contratación Internacional del Instituto de Empresa en el programa Master of International Practice.

TTR – La actividad transaccional en 2020 está sin duda muy marcada por la crisis sanitaria del COVID-19, ¿cómo describiría la situación de los players del mercado transaccional en España estos momentos?

J. R. G. -Ciertamente el entorno no es el mas propicio para el desarrollo y conclusión de operaciones en el sector transaccional. A las consecuencias adversas de la propia crisis e incertidumbre de su evolución a corto medio plazo hay que añadir las puramente logísticas propias del confinamiento. Salvo contadas excepciones, que hay que alabar por la dificultad que entraña cerrar transacciones en este contexto, la percepción es de una suerte de hibernación en la mayoría de los operadores que aguardan a que “pase el temporal”.

TTR – ¿Qué sectores diría usted que se han visto más afectados por esta situación? ¿Cuáles experimentarán una recuperación más rápida?

J. R. G. -La gran mayoría de los sectores se están viendo afectados en mayor o menor medida. El sector servicios con gran peso en la economía española, es uno de los más castigados con especial incidencia en transporte, hostelería, turismo, ocio y entretenimiento que se han visto forzados a dejar de operar en las circunstancias actuales. Estos mismos sectores deberían ser los que experimentaran una recuperación más rápida porque parte de un umbral de caída también muy pronunciada. Del mismo modo el sector salud, farmacéutico, atención sanitaria y geriátrica despertará el interés de inversores en previsión de rebrotes y subsanar debilidades identificadas durante lo peor de la pandemia.

TTR – ¿Qué medidas cree que podrían tomarse a nivel regulatorio para desatascar esta paralización?

J. R. G. -Todo lo que implique incentivar el flujo económico de la inversión y dotar de flexibilidad a los mercados redundará en beneficio de la recuperación. Desde luego no es éste el momento de subir impuestos y legislar hacia la rigidez del mercado de trabajo, sino todo lo contrario. Hay que apostar por la inversión, la innovación, la investigación y el desarrollo. Reformas.

TTR – ¿En qué situación se encuentra España respecto a la actividad transaccional de otros países de su entorno? ¿Esta paralización que vivimos se traslada de igual manera a otros países?

J. R. G. -Nuestra percepción es que la actividad en Europa y Norteamérica está en rangos muy similares. La pregunta del millón es si una vez iniciada la progresiva desescalada seremos capaces de avanzar a la misma velocidad que los más preparados.

TTR – ¿Qué cabe esperar que suceda en los próximos meses? ¿cree usted que se podrá recuperar la normalidad en 2020?

A una situación de fuerte caída en la actividad suele seguir una de actividad intensa. Creo que en este caso la recuperación de la actividad tendrá lugar más progresivamente. Habrá operadores buscando oportunidades que sin duda dejará tras de sí esta crisis, pero el entorno económico general seguirá siendo complicado. Todo hace pensar que tendremos que convivir con este entorno durante un tiempo y adaptarnos a las circunstancias. Es difícil contemplar, a día de hoy, un retorno a lo que hemos entendido como normalidad hasta mediados del pasado mes de marzo, pero en esa dirección debemos ir.

DealMaker Q&A

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TTR DealMaker Q&A with Auriga Global Investors Head of Derivatives and Alternative Investments Diego García de la Peña

Diego García de la Peña is Head of Derivatives and Alternative Investments, as well as Head of Hedging Consulting for Private Equity funds, infrastructures, real estate, family offices, and companies in Auriga Global Investor. In both activities, the aim is providing solutions for companies’ capital structures and helping them, as well as supporting sponsors to develop their business plans.

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TTR: 2018 was a record year regarding Private Equity investment, how has it been in 2019? What can we expect for 2020? 

D.G. P.: In 2019 all historical records were broken again in Spain with a volume of investment close to 8.5 billion euros compared to 6 billion euros in the previous year (+41% year-on-year increase), according to Ascri’s data. Furthermore, the number of megadeals (transactions over 100MM EUR) has increased from 8 transactions in 2018 to 18 in 2019. In our case, the activity has been very positive, since we have advised some of the most relevant players in the sector, such as the private equity fund MCH in the management of the interest rate riskof Grupo Palacios’ financing, or the management company ICG in the management of the interest rate hedging of Konecta’s financing. 

Unfortunately, 2020 has started as a year of total uncertainty due to the situation in which we find ourselves in a global health and economic alert. Initially it was starting as a good year of investment, perhaps with volumes not as high as previous years but with a good deal flow but now we will have to see the evolution of the crisis and above all its geographical range and temporal evolution. 

TTR: In recent months you have advised relevant players like Plenium Partners or MCH Private Equity, could you give us any comments about the most relevant transactions? 

D.G. P.: Plenium Partners has executed several transactions in recent months, being one of the most active market participants in the renewable energy sector. On the one hand, Rewind Energy V, a company controlled by Helia Renovables, acquired Sun European Investments Eólico Olivillo, a company that owns two 53.5 MW wind farms in Jerez de la Frontera, as well as three photovoltaic plants. Auriga advised on interest rate hedging in the refinancing. In addition, Tescobor Spain, controlled by Helia Renovables, acquired San Clemente Solar Project, owner of two solar farms in Spain, which have an aggregate capacity of 10 MW. In this transaction, Auriga advised on the interest rate hedging for the refinancing of the park. 

We can also highlight the purchase by Global Tholos, controlled by MCH Private Equity, Ardian, and LGT European Capital, of 100% of Palacios Alimentación in the American company Carlyle. Auriga advised MCH on the interest rate hedging associated with the financing of the Palacios Alimentación acquisition. 

TTR: What sectors do you consider as more active in M&A and Private Equity in recent months and currently? 

D.G. P.: One of the sectors that is experiencing a lot of activity is the renewable energy sector. On the one hand, in the parks already in operation fuelled by the new decree approved by the government guaranteeing profitability until 2031, which gives regulatory and economic stability to investors, as we have experienced on T-Solar’s portfolio refinancing of 23 PV plants deal last December. On the other hand, in the development and construction of new parks, a segment in which we are seeing many operations. 

Another sector that we believe will be very active is the agri-food sector. The entry of Private Equity funds allows the consolidation of this sector which is controlled by small family businesses generally, benefiting from economies of scale. In addition, they can provide professionalization in management, organic growth or boost internationalization. 

Finally, we believe that the Healthcare sector will continue to be very attractive for Private Equity, in areas such as pharmaceuticals, medical technology, hospitals and elderly care. As mentioned in the agribusiness sector, consolidation is one of the value levers, as is the demographic factor due to the ageing population or the improved efficiency of health services. 

TTR: Alternative financing has definitely gained traction in Spain, what can we expect in following years? 

D.G. P.: Alternative financing is seen as something normal in Spain already, both by the business sector and by the banking sector and this normalization is a very important tombstone. Companies no longer see debt funds as exclusively opportunistic source of finance and banks incorporate them as co-financiers in a wide range of operations. 

In the next few years, we expect an increase in sponsorless transactions, as up to now most alternative debt operations have been sponsor-driven. With the increase of alternative financing funds present in Spain, as well as with the reduction of company size and minimum financing amounts as requisites to carry out operations, we believe that there will be a shift towards non-sponsor driven operations. 

We also believe that there will be a greater segmentation of alternative financing operations between pure growth senior bullet financing in high-performance companies, hybrid debt for companies that need a mixed debt-equity solution or special situation financing. 

We will have to be alert to the evolution of the crisis and the liquidity situation with which companies come out of it in order to support them in specific stress situations. 

TTR: Regarding Hedging strategies for Private Equity financing and portfolio companies, what trends can you highlight? 

D.G. P.: Currently, we think it is interesting to hedge with caps instead of traditional hedging with swaps, although the volatility of the former has increased significantly due to the crisis, which has resulted in an increase in premiums. Likewise, it is still interesting, in the case of hedging with swaps, to utilize forward starting swaps in order to avoid low interest rates when the outstanding capital is higher. 

As for currency hedges, we are seeing greater and longer-term planning by the acquiring funds in conjunction with the financial teams of the portfolio companies, like we have experienced with Riverside in the hedging of La Galvanina deal. 

TTR: We are in the midst of one of the major crises and pandemics in history due to COVID-19, right at a very good moment for Private Equity and M&A. In the mid-term, how it´s going to affect the market? 

D.G. P.: We at Auriga believe that it is tremendously important to see the extension in time of the crisis at a global level. If it were a one-off problem, being it totally dramatic, but one that can be overcome in 2-3 months, we believe that the impact will be limited and recovery will be quick, although we also think that it is difficult to reach previous levels. On the other hand, if, as it seems, it is going to be a problem that extends over time because it is affecting different parts of the planet in different phases and consecutively, we believe that the consequences are unpredictable and more far-reaching. 

In the medium term, we believe that it will be important for companies and financiers to have flexibility to find imaginative solutions to the liquidity and financial structure problems that will arise, in order to offer stability to the productive system. 

We also believe that it will be a market that will provide interesting opportunities for those participants who have funds available but, on the other hand, it will be an environment in which fund-raising might prove difficult because investors may have a lower valuation of their assets due to the fall in positions in organised markets and, therefore, less money available in absolute value for allocation to alternative investment.