Spanish investment almost halves

Private equity investment in Spain slumped to just €714.7m in the first half of 2009, 46% lower than the €1.32bn seen for the same period in 2008 and only slightly higher than in the first semester of 2004, according to industry estimates.

Latest analysis from and ASCRI, the country’s private equity and venture capital association, also shows the equivalent number of deals down 20% at 376 (2008 H1: 471), though it still topped the 372 seen in the first half of 2007.

The averaged amount invested was 32% lower at only €1.9m, and no single deal topped the €100m mark whereas there had been two mega deals in the comparable part of 2008. Difficulty in raising debt also impacted on the mid-market with only 16 deals above €10m each compared to 25 such transactions in H1 2008.

The type of investment being made continued along the same trend as in 2008, with expansion dominating at 42.6% of the total value (H1 2007: 28%) and 59% of the number of deals (H1 2007: 60%). Leveraged transactions were an endangered species: only 13 were done and 250m euros invested (H1 2008:16 deals, €463m).

Sectors grabbing the lion’s share of investment by value were healthcare (30%), consumer products (20%), and energy and environment (8.6%). Top sectors based on the percentage share of total deals were software (22%), consumer products (9.6%), and biotechnology (10.9%).

Fundraising slumped 80% to €359.6m year-on-year, though previous activity was so strong that ASCRI estimates there is enough for four years of deals.

Divestments raised €262.8m at cost (H1 2008: €316m, H1 2007:€729m), returning to levels last seen in the first half of 2003, though the number of such deals increased 17%, from 120 to 140. Twenty two management buy-backs accounted for 36% of the total divestment value, write-offs accounted for 26%, and trade sales 16%. There were no exits through stock markets.

On a slightly more optimistic note, ASCRI said that activity so far in the third quarter of 2009 pointed to a slight upturn, as evidenced by deals such as ProA Capital’s buyout of the food group Grupo Palacios and Investindustrial’s purchase of 50% of the PortAventura theme park and resort. The association estimated that total investment in 2009 would be around €2.5bn.