Private equity in Portugal – growing despite uncertainties

Investment in private equity has grown significantly in Portugal and all over the world over the past two years.

Given the current macroeconomic backdrop, the high volatility of inflation rates in the markets, added to concerns over a possible systemic crisis in the US banking system after the failure of Silicon Valley Bank (SVB) and Signature Bank, private equity has been extremely attractive to investors who, in addition to diversifying their portfolios, have sought to allocate their resources in sectors that have shown resilience, stability and profitability in recent months.
According to TTR Data, investments from private equity companies in Portugal has enjoyed signifiant growth over the past four years.
Funds People points out that in 2022 there were 49 transactions with a mobilised capital of €1.6Bn with these figures representing an increase of 32% in relation to the volume of operations and 60% in total value.
Lest year saw the saw the greatest volume of investments and operations since 2015. As to the most attractive assets in recent years, these have been spearheaded by technology and services and distribution, responsible for 14 and 18 transactions in Portugal each says Funds People.
But when it comes to mobilised capital, it was the technology area which shined the most, reaching a peak in 2019 at €2.3Bn.
As to the geographical spread of transitions, cross-border enjoyed a greater volume and value compared to Portuguese operations. In 2022, 67% of private equity investments in Portugal had one or more overseas components, with a total of €1.6Bn posted that year for cross-border alone.
Over the past five years, in terms of transactional volume, Spain and the United States were the countries that most invested in the Portuguese market, wot 38 and 32 operations respectively.
On the other hand, in terms of value, the United States and France have contributed €7.2Bn and €5.6Bn respectively since 2018.
The most active sectors in inbound acquisitions in 2022 included technology with 12 operations, services and distribution with 10 operations, and the real estate sector with three.
One of the biggest investments undertaken in Portugal by a private equity entity over the past four years, says Funds People, was the acquisition by Morgan Stanley Infrastructure Partners with a 49% share in Altice Portugal FTTH, previously held my MEO, a subsidiary of Altice, for €2.3Bn.
Regarding the private equity firms with the greatest volume of acquisitions in the Portuguese market, these were Oakley Capital and Oxy Capital with eight each.
Then there was the large operation by Explorer Investments in 2022 – €5 million in NextBitt, based in Lisbon.
In relation to divestments, Oxy Capital has seven operations, followed by Explorer Investments with five over the past four years.
However Funds People signals that despite these positive results, today private equity funds are “exposed to an interesting paradox”.
“Although they are products with good prospects of financial returns, investments in these vehicles imply challenges that could ring alarm bells of caution and even great risks even for the more experienced investors”, says Funds People.
And despite the recent failure of Silicon Valley Bank, private equity companies continue to be very interested in investing, even in this bank.
In this sense, the largest private equity companies in the world like Apollo Global Management, Ares Management, Blackstone, the Carlyle Group and KKR & Co. were interested in acquiring a portfolio of loans held by SVB and investors began circulating this bank’s assets which according to Moody’s has “a very established history in the sector that supports its expertise, conservative subscription, and better performance than its rivals in terms of the quality of its assets.”
In this respect, the prospects for the private equity market in Portugal seem encouraging in the midsts of so much uncertainty.
Support for investment in private shareholdings in Portugal by the Government has stayed constant and the results are reflected in the large number of funds and the level of capital raised by these funds that are seen in the Portuguese market.
Even more so now that tax incentive regimes are applicable to private equity companies, both private equity funds and private equity companies.
The best private equity funds operating in Portugal according to Leaders League are: Activecap, Atena Equity Partners, C2 Capital Partners, Caixa Capital, Crest Capital, ESC, Explorer Investments, Iberis Capital. Magnum Capital, Menlo Capital, Oxy Capital and Vallis Capital Partners.