Iberia a rare bright spot as pandemic hits PE buy and builds

TMT deals accounted for a large proportion of private equity add-ons in the second quarter of this year as the move to remote working compounds appetites for tech assets.

The Iberian Peninsula has defied a global slowdown in private equity buy and build activity.

Managers completed 20 Iberian add-ons in the first half of this year, up 11 percent from H1 2019, according to Silverfleet Capital’s latest European Buy & Build Monitor, published Monday. The peninsula – encompassing Spain and Portugal – was the only region globally to record an increase in the deal type over the period.

As of 3 November, Spain had the second-highest number of confirmed cases of covid-19 in Europe behind France.

Buy and build activity in Europe declined 37 percent to 214 deals over the period as dealmakers had to contend with travel bans, lockdowns and portfolio company triage. The bulk of deals were announced in Q1 2020, before the pandemic had fully escalated on the continent.

France had 19 add-ons in the first half, down 51 percent from last year. Benelux and the DACH region – Germany, Austria and Switzerland – were the only regions besides Iberia to post declines of less than 40 percent during the period, with activity falling 9 percent and 22 percent respectively.

Firms added 51 acquisitions in the Nordics, more than any other. This was still a 43 percent decline from last year.

Technology, media and telecommunications deals accounted for 32 percent of add-ons during the second quarter, up from an average of 20 percent in previous periods. Appetite for technology assets has been robust throughout the pandemic as the move to remote working accelerates the digitalisation trend.

There were seven add-ons in the half-year with an enterprise value above €65 million, all of which occurred in the first quarter. Four of these were TMT-related, including the largest: Danish digital payments service provider Nets acquired Polish merchant acquirer Polskie ePłatności for €405 million in March.

“That the TMT sector has led the way over this period should be of little surprise given the growing reliance on digitally led business models to deliver operational stability and performance,” Silverfleet managing partner Gareth Whiley said in a statement.

“We expect to see add-ons play a central role over the rest of the year as continued market volatility creates attractive acquisition opportunities for growth-oriented companies.”