H2 to be dominated by mergers and acquisitions

The second half of 2023 will be dominated by mergers and acquisitions in Portugal with a moderate optimism for Portugal’s economy and foreign direct investment.

According to consultations made by Jornal Económico those canvassed are more or less in agreement that company mergers and acquisitions in Portugal will be affected by factors of instability and volatility.
Most of the main operations that were closed in the first quarter of the year were “inherited” from 2022 in that the processes “unfolded last year or at the beginning of this year” according to Francisco Alvim, head of M&A at Howden, an independent insurer and valuer.
“The M&A market in the first months of the year suffered in particular because of the increase in interest rates and inflation having a negative effect on the valuation of assets (since investors are demanding higher returns, which reduces the value of assets)”.
“Therefore the perception in the market was that those who didn’t need to sell assets to reduce liabilities or free up liquidity, didn’t sell”, he said.
However, despite the main factors that led to a contraction in M&As in 2022 continuing in the first quarter of 2023, “the trend should invert somewhat in the coming months”. “First, because there is an expectation that interest rates will not continue to rise, or might even be cut, which will cause the value of quality assets to rise, giving a tonic for the market”, according to another source who added that in Portugal there was an expectation that funds from the Consolidate Programme will finally reach the market.
The Consolidate Fund ,which has €500 million and comes from European Union bazooka funds managed by Portugal’s development bank Banco Português de Fomento, is aimed at supporting the application of venture capital for investments in SMEs and Mid Caps impacted by Covid-19 which while weakened by the pandemic, are economically viable and have a recovery potential.
M&A operations in Portugal included the acquisition by the VC Growth Partners Capital of a share in a company from the Campicarn Group for €6.4 million using funds from the Banco português de Fomento but many others are likely to follow by the end of the year including the privatisation of transport systems company Efacec, TAP, and the capitalisation of EDP.