Pension funds and infrastructure funds among investors targeting the banking, healthcare and real estate sectors, though some deals on hold due to doubt about new government’s plans
The coming year will be a good one for M&A activity in Portugal, though the upsurge in foreign interest has been tempered somewhat by political uncertainty, says José Diogo Horta Osório, partner at Cuatrecasas, Gonçalves Pereira.
“Last year was very good in terms of corporate work and M&A but the elections in October have resulted in something of a momentary suspension of interest, especially from foreign investors,” Horta Osório says. He adds that it has been foreign investors driving market activity, especially in privatisations. However, the recent change in government has given rise to uncertainty regarding the immediate economic future.
“Many foreign investors have put deals on hold until the budget in 2016,” Horta Osório says. “There needs to be more clarity on what the economic plan will be before they are willing to make investment decisions.” He expects that the lull will be short-term and that stability will return once the budget is clear and business can go “back to normal”. Even so, Horta Osório is expecting a shift in the types of assets that investors pursue.
“I don’t envisage many more major privatisations over the next few years but that does not mean we will not see other opportunities arise,” he observes. Horta Osório cites the banking sector, healthcare, real estate, toll roads and renewable energy as areas in which activity is likely to increase. “Many of these sectors offer stable cash flows and long-term returns for shareholders, which makes them attractive assets,” he continues. “We are seeing pension funds, infrastructure funds, and other long-term investors targeting these kinds of opportunities.”
Horta Osório says that many investors are looking at “the long-term perspective and at how they can build profitability over a number of years.” He adds: “In that sense, I don’t expect to see a lot of change in the years ahead and I think that 2016 will be a good year for M&A.”