2009 Spanish Private Equity
Report
José MARTÍ PELLÓN
Universidad Complutense de Madrid
Marcos SALAS DE LA HERA
webcapitalriesgo.com
April, 2010
The 2009 Spanish Private Equity Report, conducted in collaboration with
the Spanish VC & PE Association (ASCRI), covers a wide range of
topics regarding the fund raising activity, investments, divestments and
portfolio recorded of the whole population of investors located in Spain.
The 260 page report, which is offered in Spanish,
also includes a
comprehensive summary and 60 pages with a set of tables, both in
English
, covering all aspects from fundraising to investments and
divestments at cost.
Those tables offer full data with a 3 year perspective plus a similar
breakdown comparing data on the previous 18 months with a half year
perspective.
Copyright © 2010, by José Martí Pellón/Marcos Salas de la Hera
Total or partial reproduction of this document is strictly forbidden, as is its manipulation with software or transmission in any form via any medium, be it electronic, through photocopying or other means without the previous permission of the Copyright holder.
Access to the Executive Summary is free at www.webcapitalriesgo.com; this may not be made available to the public through any other means, electronic or written, without the written permission of the rights holder.
Any infringement of the above rights will be liable to claims presented before the Madrid Courts (Spain).
Access to the full Report, including over 100 tables, is available at:
www.webcapitalriesgo.com
Executive Summary
Global outlook
The world's leading economies ended year 2009 with negative Gross Domestic Product (GDP) growth rates as a consequence of the effects of the world financial crisis on the real economy. According to the International Monetary Fund (IMF), the United States ended the year with a fall of 2.4 per cent compared to -5.3 per cent in Japan, -4.8 per cent in the UK and Germany or -2.2 per cent in France. These latter three countries ended last quarter with a moderate positive growth, which reached 0.6 per cent in France, while U.S. GDP rose 5.6 per cent.
The global economic recovery will continue in 2010, although the Organization for Economic Cooperation and Development (OECD) forecasts that the GDP of the major developed economies will grow less in the first and second quarters of 2010, compared to those of the last quarter of 2009. The OECD attributed that slowdown to the end of public support schemes and the reduction in inventories. The organization predicts that higher growth rates in 2010 will come from emerging countries, such as China, India and Brazil.
In the euro region, in view of the stage of soft growth and the moderate inflation rates anticipated, it is expected that interest rates remains at very low levels in 2010
mortgages granted under optimistic conditions. Additionally, saving banks are still considering regional mergers to improve their feasibility under the watchful eye of the Bank of Spain.
The Alternative Investment Fund Managers directive, which affects hedge funds and VC/PE funds, is expected to be approved during the Spanish presidency of the European Union, in the first half of 2010. Several U.S. and British official organisms and the European Venture Capital Association (EVCA) describe the proposal as too protectionist and insists that it would seriously harm the private equity industry.
Regarding the VC/PE activity in Spain, there is a moderate optimism about 2010 activity, even though the environment exhibits similar difficulties for fundraising and closing leveraged transactions of certain size. Turning to divestments, the IPO announcements of large companies, such as Amadeus, and the recent vitality of the Alternative Stock Market (MAB), increase the optimism in the industry.
In macroeconomic terms, the volume invested in 2008 represented 0.28 per 100 of national GDP at current prices, compared to 0.42 per 100 obtained in 2007.
Graph 1
Fundraising and investments as percentage of GDP
0,00% 0,10% 0,20% 0,30% 0,40% 0,50% 0,60% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Nuevos fondos captados/PIB (New funds raised/GDP) Inversión total/PIB (Investments/GDP)
Fundraising
The volume of new funds raised by Venture Capital/Private Equity (VC/PE, henceforth) institutions operating in Spain fell 56 per cent in 2009, to 1.173 million Euros, compared with the same period in 2008 (2.67 billion Euros), resembling the volume recorded in 2003. 71 per cent of the new funds were raised by domestic VC/PE institutions, whereas the rest corresponded to the allocation of international funds for their investments in Spain.
Only 53 VC/PE institutions were involved in fundraising, thirteen fewer than those which contributed with new resources in 2008. The increase was below 10 million Euros in 27 of them.
Among the new funds raised the first closing of the third fund managed by Nazca Capital, which accumulated 116 million, and the first closing of the third fund from Nauta Capital, the high-technology focused VC management company, should be highlighted. The former aims to achieve 150 million Euros at the final closing. Additionally, capital increases of two Government-owned entities ranked high in the list of VC/PE companies raising new funds.
VC/PE institutions continue having many difficulties in attracting new funds from the main traditional contributors, such as financial institutions, institutional investors, non-financial corporations and private individuals.
A third of new funds raised by VC/PE institutions came from public-sector-related investors, reaching the historical maximum of 391.6 million Euros. These were followed by financial institutions, with a share of 28.2 per cent, and funds of funds (12.3 per cent).
As in 2008, investors expressed their intention to devote a greater share of the new funds raised to companies at the early (seed and startup) and expansion stages (58.2 per cent) rather than focusing on buyouts in mature firms (41.8 per cent).
The resources of VC/PE entities available for investment were estimated at 4.69 billion Euros, compared with 5.7 billion estimated at the end of 2008. The fall is greater than the gap between the amount invested and the new funds raised due to the reduction in available resources in some VC/PE institutions affiliated to banks and corporations.
Graph 2
Origin of new funds raised Realized Capital Gains
Not Available (i.e. other) Capital Markets Academic Institutions Government Agencies Private Individuals Corporate Investors Fund of Funds Insurance Companies Pension Funds Banks 0,0% 10,0% 20,0% 30,0%
New funds raised in 2009 New funds raised in 2008
Total funds under management
Chart 3 shows that total capital under management as off December 31, 2009 amounted to 22.78 billion Euros, compared with 23.26 billion Euros registered a year earlier. The reduction is caused by the negative difference between the new funds raised in 2000 and 2009, due to the elimination of closed-end funds established in 1999, and the fall in existing funds due to the reduced commitments of some limited partners in existing funds.
The percentage of resources under management from abroad stood at 49 per cent. It is important to highlight the resources made available by the pan-European players for their investments in Spain. Domestic financial institutions (commercial and savings banks) reduced their share one and a half percentage points, to 19.1 per cent.
At the end of 2009 a total of 185 active VC/PE institutions were identified1, of which ten began and four ceased their activities throughout the year.
According to the type of management, 111 Management teams that manage funds from third parties and 74 VC/PE firms were identified. The former managed a total of 203 VC/PE funds, seven more than those recorded in 2008, including closed-end funds and portfolio companies with unlimited duration.
1
Graph 3
New funds raised and total funds under management 25 20 15 € Billion 10 5 0 1.999 2.000 2.001 2.002 2.003 2.004 2.005 2.006 2.007 2.008 2.009
New funds raised
Private Equity Management Companies Private Equity Companies
Investments
The volume invested in 2009 amounted to 1.67 billion Euros, down 45.6 per cent from the amount recorded in 2008, due to the restriction of credit that continued affecting the closing of levered transactions (buyouts) of a certain size. The amount recorded was slightly below the figure reached in 2004 (2 billion Euros).
The middle market was the main support of the VC/PE market in Spain, although there was a decline in the number of transactions in the last three years. In 2009, VC/PE institutions carried out 39 operations between 10 and 100 million Euros, compared with 48 and 60 conducted in 2008 and 2007, respectively. Only one deal of more than 100 million Euros was recorded, compared with seven recorded in 2008.
In the lowest category, 75.5 per cent of the number of operations did not reach the one-million-Euro threshold, accumulating 9.2 per cent of the invested volume.
The weight of the invested volume by international funds in companies operating in Spain represented 20.4 per cent of the total, which is a percentage slightly lower than the 23 per cent reached in 2008.
Among the main deals in 2009, the Cajastur Capital minority stake in the infrastructure company, Itínere, the 50 per cent purchase of Port Aventura Entertainment by Investindustrial, and the acquisition of the generic drugs Portuguese group, Generis, by Magnum Industrial Partners, should be highlighted.
96 players, out of the 191 with existing portfolio, made at least one new investment in 2009, compared with 111 (out of 181) that made at least one in 2008.
A positive aspect was the high number of operations2 performed, 898, decreasing only 7.8 per cent from the maximum recorded in 2008 (974). There was a 5 per cent decrease in the number of initial investments, to 503, whereas follow-on investments in former investee firms fell 11 per cent, to 395 transactions. Once double counting of multiple rounds in the same company are excluded, the number of companies receiving VC/PE funding for the first time was 494.
The average amount invested per deal in 2009 decreased 41 per cent, to 1.9 million Euros. The mean value of initial investments decreased from 4.7 to 2.5 million Euros last year.
52.4 per cent of the total invested went to companies at the expansion stage in 2009, amounting to 875.1 million Euros, compared with 49.2 per cent (1.5 Billion Euros) in 2008. Buyouts (LBO/MBO/MBI/LBU) maintained a weight of 31 per cent, although the volume was reduced from 948 to 522 million Euros last year. Moreover, the number of operations at the expansion stage reached the historical maximum of 608 transactions, representing 67.7 per cent of the total. Among them, the deals in Grupo Siro (Madrigal Participaciones) and in Cintra Aparcamientos (AC Infraestructuras funds) should be highlighted. The restriction of credit by financial institutions (commercial and savings banks) led to decrease in the number of buyouts from 27 (in 19 companies) in 2008 to 21 (in 15 companies) in 2009. The most important acquisitions were Hofmann (Ibersuizas and Realza Capital), Palacios (Proa and Talde) and Port Aventura (Investindustrial).
Graph 4
Destination of investments by development stage 80% 70% 60% 50% 40% 30% 20% 10% 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Buy-outs & other later stages Expansion
Early Stages
Source: ASCRI/www.webcapitalriesgo.com.
Deals in companies such as Hofmann or Palacios, among others, raised the weight of the invested volume in Consumer Products sector to 19.2 per cent. Medical/Health (14.6 per cent) and Energy/Natural Resources (11.9 per cent) ranked second and third, respectively. From the standpoint of the number of operations, the sectors that concentrated the highest number of deals are Computer-related (21.9 per cent), Industrial Products and Services (10.1 per cent) and Biotechnology/Genetic Engineering (9.9 per cent).
Investment in technology-based companies amounted to 328.6 million Euros (19.7 per cent), compared to 609.7 million Euros (19.9 per cent) in 2008.
Madrid received 28.7 per cent of the invested volume in Spain, falling from 41.2 per cent in 2008. Companies such as Itínere have their headquarters in that region. In second place was Catalonia, with a share of 26.4 per cent, with representative investments such as Port Aventura or Spanair.
By number of deals, 24.1 per cent took place in Catalonia, 21.8 per cent in Madrid and 15 per cent in Andalusia.
Graph 5
Destination of investment by sector
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Other( Other Services
Industrial Products & Services Consumer Products
IT
Divestments and portfolio
The volume of divestments at cost amounted to 857.7 million Euros in 2009, with 11.5 per cent being the increase over the figure recorded a year earlier. Nevertheless, the number of divestments decreased from 370 in 2008 to 270 in 2009. The number of final and partial divestments was identical in 2009.
Among the limited number of total divestments carried out in 2009, the sale of Dinamia and N+1 holding in Atecsa to AC Infraestructuras and AC Desarrollo funds; and the secondary buyout of Tandem Capital in Ovelar, previously controlled by Corsabe, should be highlighted
The average amount of final divestments increased by 74 per cent, to 5.9 million Euros, whereas the averaged volume in partial divestments dropped by 17.4 per cent, to 0.5 million Euros. The average holding period in the fully divested companies was 5.1 years, compared with 5.7 years in 2008.
Graph 6
Investment, divestment flows and number of operations
5.0 1,200 4.5 1,000 4.0 3.5 800 3.0 Number € Billion 2.5 600 2.0 400 1.5 1.0 200 0.5 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Amount invested Divestments at cost Number of investments
Source: ASCRI/www.webcapitalriesgo.com.
Write-offs accounted for 51.3 per cent of the final divestments due to the influence of some operations, such as USP Hospitales. Trade Sales ranked second with 28.1 per cent. Regarding the number of final divestments, just over one third (46) were Owners/Managers Buy-back operations, whereas Trade Sales and Write-offs registered 18.5 per cent each (25 divestments). The latter decreased from the 52 recorded in 2008. 9 secondary buyouts were also recorded.
The average amount invested per firm dropped 42 per cent in 2009, to 2.1 million Euros, whereas the average holding period rose slightly to 3.3 years.
By sector, the leading category was Computer-related, with 511 firms (17.6 per cent), followed by Industrial Products and Services, with a total of 389 firms (13.4 per cent), and Other Services, with 299 firms (10.3 per cent).
Regarding the geographical location of the investee firm, Madrid accounted for 50.6 per cent of the amount invested. Madrid and Catalonia have 18.4 per cent and 20.9 per cent of the number of firms, respectively.
List of investors considered
a)
Private equity companies that manage their own resources
1) Activos y Gestión Empresarial, SCR, SA 2) ADE Capital Sodical SCR SA
3) Aleuria Aurantia SCR, de Régimen Simplificado 4) Arico 99 SCR
5) Arnela Capital Privado SCR de Régimen Simplificado 6) Blacader Capital SCR, de régimen simplificado
7) CCAN 2005 Inversiones Societarias, SCR, S.A. de Régimen Simplificado3
8) Caja de Ahorros de la Inmaculada Desarrollo Empresarial, SCR, SA 9) Capital Riesgo de la Comunidad Autónoma de Madrid SCR, SA 10) Capital Stock, S.C.R., S.A. de Régimen Simplificado
11) Catalana d’Iniciatives C.R., SA
12) CMC XXI SA, SCR Sociedad de Régimen Simplificado 13) Compas Private Equity
14) Corporación Empresarial de Extremadura, SA 15) Corporación Sant Bernat, SA (CORSABE) 16) Cross Road Biotech S.A., SCR
17) Empresa Nacional de Innovación, SA (ENISA) 18) Entrinnova
19) Fides Capital, SCR, SA
20) Gala Capital Partners4
21) Grupo Alisio Canarias Inversiones S.A. 22) Grupo Intercom de Capital, SCR, SA 23) Infu-capital SCR de Régimen Simplificado 24) Iniciativas Económicas de Almería, SCR, SA 25) Innotarget
26) Innova 31, SCR, SA 27) Invercaria, SA
28) Inveready Seed Capital, SCR de Régimen Común, S.A 29) Inverjaén Sociedad de Capital Riesgo, SA
30) Inverpyme, SA
31) Inversiones e Iniciativas Málaga, SCR, SA 32) Inversiones ProGranada, SA
33) INVERTEC (Societat Catalana d'Inversió en Empreses de Base Tecnològica, SA) 34) Inversiones Valencia Capital Riesgo SCR, SA
48) Popular de Participaciones Financieras SCR, SA 49) Primmera Inversiones en Desarrollo SA
50) Realiza Business Angels, SA 51) Reus Capital de Negocis, SCR,SA 52) Sadim Inversiones
53) SEPI Desarrollo Empresarial, SA (SEPIDES) 54) Sevilla Seed Capital, SCR, SA
55) Sociedad de Desarrollo de las Comarcas Mineras, S.A (SODECO) 56) Sociedad de Desarrollo Económico de Canarias, SA (SODECAN) 57) Sociedad de Desarrollo de Navarra, SA (SODENA)
58) Sociedad para el Desarrollo Industrial de Aragón, SA (SODIAR)
59) Sociedad para el Desarrollo Industrial de Castilla-La Mancha, SA (SODICAMAN) 60) Sociedad para el Desarrollo Industrial de Extremadura, SA (SODIEX)
61) Sociedad de Fomento Industrial de Extremadura, SA
62) Sociedad Regional de Promoción del Pdo. de Asturias, SA (SRP) 63) Societat de Inversió Cooperativa – SICOOP
64) Soria Futuro, SA 65) Start up Capital Navarra
66) Tandem Capital Gestión, S.C.R. de Régimen Simplificado, S.A. 67) Torreal, SCR, SA
68) Unirisco Galicia SCR, SA
69) Univen Capital, SA, SCR de Régimen Común 70) Valmenta Inversiones, SCR, SA
71) Vector Capital SCR de Régimen Simplificado SA 72) Venturcap, SCR, SA
73) Venturewell Capital SCR, SA
74) Vigo Activo, S.C.R. de Régimen Simplificado, S.A.
b)
Domestic Private Equity Management Companies that manage funds
and other vehicles on behalf of limited partners
1) Abraxa Integrated Financial Solutions, SGECR, SA2) AC Desarrollo, SGECR
3) Ahorro Corporación Infraestructuras 4) Activa Ventures, SGECR, SA 5) ACP Active Capital Partners, SL 6) Adara Venture Partners
7) Artá Capital SGECR, SA 8) Atitlan Capital, SGECR, SA
9) Atlas Capital Private Equity SGECR, SA
10) AXIS Participaciones Empresariales, SGECR, SAU. 11) Axón Capital e Inversiones SGECR, SA
12) Banesto SEPI Desarrollo F.C.R.
13) Bankinter Capital Riesgo, SGECR (Intergestora) 14) Baring Private Equity Partners España, SA
15) bcnHighgrowth, SGECR, SA5
16) BS Capital6
17) Bullnet Capital, SCR, SA 18) Caixa Capital Risc SGECR, SA 19) Cajastur Capital
20) Caléndula de Inversiones, SGECR, S.A.
5
Entidad que gestionará los recursos de Bcn Emprén, SA, antes considerados por separado.
6
Entidad que gestionará los recursos de Aurica XXI, SCR SA, BanSabadell Inversió Desenvolupament, SA, antes considerados por separado, y de un tercer fondo dedicado a energías renovables.
21) Cantabria Capital SGECR, S.A
22) Capital Alianza Private Equity Investment, SA 23) Capital Grupo Santander SGECR, SA
24) C.D.T.I. (Centro para el Desarrollo Tecnológico Industrial) 25) Clave Mayor SGECR, SA
26) Cofides
27) Corpfin Capital Asesores, SA, SGECR 28) Debaeque Venture Capital
29) Diana Capital, SGECR, SA 30) EBN Capital SGECR, SA 31) Eland Private Equity SGECR SA 32) Espiga Capital Gestión SGECR, SA 33) Finaves, SCR, SA
34) GED Iberian Private Equity, SGECR, SA 35) Gescaixa Galicia, SGECR, SA
36) Gestión de Capital Riesgo del País Vasco, SGECR, SA 37) Green Alliance SGECR SA
38) Going Investment Gestión SGECR
39) Hiperion Capital Management, S.G.E.C.R., S.A. 40) iNOVA Capital
41) Inversiones Ibersuizas, SA 42) Magnum Industrial Partners 43) MCH Private Equity, SA
44) Mercapital Servicios Financieros, SL
45) Minerva Capital7
46) Miura Private Equity
47) Mobius Corporate Venture Capital SGECR, SA 48) Monitor Capital Partners
49) Nauta Tech Invest
50) Nazca Capital, S.G.E.C.R, SA 51) Neotec Capital Riesgo
52) Next Capital Partners, SGECR, S.A 53) Nmás1 Capital Privado, SGECR, SA 54) Nmas1 Eolia SGECR, SA
55) Proa Capital de Inversiones SGECR, SA 56) Qualitas Equity Partners
57) Quercus Equity
58) Realza Capital SGECR, SA 59) Riva y García Gestión, SA
60) Santander Central Hispano Desarrollo, SGECR, SA 61) Seed Capital de Bizkaia, SA
62) SES Iberia Private Equity, SA
76) XesGalicia SGECR, SA 77) Ysios Capital Partners
c)
Private Equity Management Companies that manage pan-European
Funds, with a local office
1) 3i Europe plc (Sucursal en España) 2) Advent International Advisory, SL 3) Apax Partners España, SA 4) Bridgepoint5) Candover/Inversiones Astrau, SL 6) The Carlyle Group España, SL 7) CVC Capital Partners Limited
8) Demeter Partners
9) Doughty Hanson
10) Hutton Collins
11) Investindustrial Advisors, S.A. 12) PAI Partners.
13) Permira Asesores
d)
Private Equity Management Companies that manage pan-European
Funds, without a local office
1) Atlas Venture8
2) BC Partners
3) Bertelsmann Digital Media Investments 4) Charterhouse Capital Partners
5) Cinven Limited
6) Crédit Agricole Private Equity
7) Elaia Partners9
8) First Reserve
9) G Square
10) Goldman Sachs 11) HG Capital
12) Highland Capital Partners 13) Insight Venture Partners 14) JP Morgan Partners
15) Kennet Partners10
16) Mangrove Venture Capital 17) Thomas H. Lee Partners 18) Providence Equity Partners 19) Quadrangle Group LLC 20) Scope Capital Advisory 21) Palamon Capital Partners
8
Introducida hacia atrás por sus coinversiones con operadores españoles en empresas radicadas en España.
9
Introducida hacia atrás por sus coinversiones con operadores españoles en empresas radicadas en España.
10
e)
Investors that exited the market in 2009
1) Abn Amro Capital2) Impala Capital Partners, SL 3) Nmas1 Capital Empresarial