While many Spanish players still find it difficult to do Portuguese deals, over the years Portugal has sparked some opportunities for its Spanish neighbour. Total number of investments increased in 2000 from 95 in 1999 to 161 in 2000, with value up from euro118.6 million to euro183.2 million, according to the EVCA. Making a play for the growing number of Portuguese deals, next June 3i will open a permanent office in Lisbon. The group already has a director in place, Ricardo Cunha Vaz and would like to bring the team to four. There are very few firms on the ground in Portugal, mainly because it is such a small market, says Mark Heappey. There are a few domestic players related to the banks, but no international funds. “We will build up a steady presence there,” he says, adding that although it is an underdeveloped market, deal flow is reasonably strong and he compares the region to Catalua in terms of GDP and industry focus.

The main issue holding back Portugal as a private equity market is its size. Spanish-based firms such as Dresdner Kleinwort Capital and Baring Private Equity Partners (BPEP) have managers dedicated to the region. David Baker of BPEP describes Portugal as a target area for acquisitions rather than actual investments. Another well-established Spanish player suggests a preference for working with UK firms, describing Portugal as a difficult market due to a traditional hostility with its Spanish neighbour. While some sources suggest the two countries have been ignoring each other for years, the situation appears to be improving.

Says Juan Diaz-Laviada of Dresdner Kleinwort Capital, a firm with over 13 years’ investment experience in the Iberian region: “Portugal is a difficult market because of its size, but a wonderful country for doing business with an excellent economy and almost no unemployment.”