PE buyers meeting price expectations – DLA Piper

Spain is experiencing a relative upturn in private equity activity, says Juan Picón, Managing Partner of DLA Piper in Madrid. Although the economic outlook remains tough there is however now emerging a closer alignment of buyers’ and vendors’ expectations.

España está demostrando una relativa mejora en su interés hacia los fondos de capital riesgo, dice Juan Picón, Socio Director de DLA Piper en Madrid. Aunque el panorama económico actual y el futuro sigan complicados, está surgiendo una mayor alineación entre las expectativas de los compradores y los vendedores.

“Investment houses are seemingly now much keener to do deals. They have funds to invest and are finding more realistic prices and vendors that are seemingly much more willing to sell – there has been a realisation among many that there will be no quick economic turnaround.”
There is however no immediate sense that the markets have bottomed out, he says, but private equity houses seem increasingly content to lose a little of the potential upside rather than the entire deal. In addition, he sees greater willingness for companies to engage in more debt for equity swaps, while many banks are also reassessing their loan portfolios. 
“We are seeing some ‘vulture’ type deals, but not on the scale experienced in the US or UK, for example. Some banks remain content to hold on to bad debt and be very flexible with creditors, but others are keener to get losses off their books. Recent deals have seen some very deep discounts on the debt held by financial institutions.”
Picón also senses that new financing streams are beginning to emerge.
“In Spain, the cajas may still be very risk-averse and some unable structurally to lend, but mainstream banks are beginning to open up again. Money is not in abundance but it is there for the right kinds of deals.”
There is therefore an evident new momentum in parts of the corporate sphere albeit Picón remains cautious about how long this may last.
“We started 2010 with very low expectations, but recent months have seen a significant upturn in transactional activity. We may have been lucky in some respects, clients may be very choosy about what deals they want to do but what has proved common across all the transactions we have been involved in is that they want senior lawyers on their deals. They want lawyers who can roll up their sleeves and demonstrate that they can add value to their transaction.”