In March, Investindustrial, a buyout firm focused on Southern Europe, reached its €1.25 billion hard-cap for its fifth fund – one of only a few to have been raised for the region in recent years.
“It was a very difficult fundraising climate,” says Andrea Bonomi, Investindustrial’s principal partner and founder. “At the beginning of last year, Southern Europe was completely closed. Investindustrial had the fortune that the flight of quality was happening – the little money that there was for Southern Europe all went to us.”
“In Southern Europe, we have just gone through the longest recession in living memory, and the first clean-up of players in the region in the history of private equity.”
However, the situation has improved since then, he says – because people no longer think the disintegration of Europe is likely. “When we were raising our fund, there was even a possibility that Europe would go to pieces. I think there’s as much of a chance now as there was then – but there’s not the perception that this is the case.”
2014 will be the first year of recovery for Southern Europe, he says. “These are cycles: last year everything was against Southern Europe. Right now, the Nordic market is over-invested. So if you want to put money in Europe, Southern Europe doesn’t look that bad at the moment.”
However, doing deals isn’t easy. Investindustrial hasn’t made any new investments in Spain and Italy in 2013. “In Italy, there’s a mismatch in price expectations between buyers and sellers – and a lot of [that] is due to political uncertainty. We don’t know the taxation policies in the medium and long term; we don’t know the labour reforms, etc. That impacts the price of assets. Yet for high quality assets, prices remain good,” he says.
He does anticipates a busier 2014, though. “We expect to do two deals in Italy and one in Spain. We are also working on two exits in the next quarter and two later in the year.”
This will be partly driven by improved credit conditions, according to Bonomi. “We have issued more than €1 billion of bonds in the last month – that’s unique. We recently issued a €420 million bond for PortAventura, a theme park in Spain; demand was six times bigger than what we issued. And we are talking about a bond on a theme park in Spain, which a year ago would have been unthinkable. Investors’ confidence has improved; they are looking for higher yield and they are coming to Southern Europe.”