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Drop in Spanish activity

The private equity industry in Spain experienced a drop in both funds raised and investments made in the first half of 2002, according to a report published by WEB Capital Riesgo in collaboration with the Spanish venture capital association, ASCRI. In 2001 Spain experienced only a moderate reduction in investment volumes but the first half of 2002 brought the same drop in activity that occurred in the majority of countries the year before.

In the first half of 2002 €262.1 million was raised in Spain for private equity investment, of this more than half is set to be invested in leveraged buyouts. The total of funds raised is 49 per cent less than in the preceding six months and 51 per cent less than in the first half of 2001. The research identified a total of 82 investors in Spain, including four newcomers who joined the market in the first half of the year, raising €141.2 million. José Martí’ Pellón, professor of financial management at the Universidad Complutense de Madrid, expects more capital, potentially as much as €619 million, will have been raised in the second half of the year. However, fund raising will still show an overall decline compared to 2001. Domestic sources committed 59 per cent of the capital raised with financial institutions the principle source of funds.

In total, €229.8 million was invested in 163 deals in the first six months of 2002, 60.5 per cent less than was invested in the second half of 2001 and 63.9 per cent less than the first half of 2001. The report cites the greater selectivity of investors in the company screening process as one of the reasons for this drop. However, the fact that the fall in the number of deals was smaller, only 26.6 per, suggests a lack of large deals. Buyouts accounted for just €35.8 million of the total invested. Less than half (35) of the 82 investors added new companies to their portfolios. The market was dominated by expansion stage investments, which accounted for two-thirds of the amount invested and two-thirds of the number of deals. The decline of investments in IT and communications also continued as investors focused on traditional industries.

Divestments also dropped off slightly; 99 deals worth €106.1 million were completed, compared to 143 deals worth €118.1 million in the second half of 2001.