Market Trends in Iberian Private Equity Transactions 2023 edition

This study, an overview of market trends in private equity transactions in Spain and Portugal, analyzes the most significant deals on which Cuatrecasas advised. It analyzes 51 private equity deals signed in 2021 and 2022 (36 in Spain and 15 in Portugal) with transaction values over €10 million in Spain and without limitation in Portugal.

Spain: 2022 Market trends at a glance

• Middle market transactions gained traction
• Secondary buyouts increased significantly
• When the fund acquires a majority shareholding, the fund buys 100% of the target company through an SPV and managers or founders reinvest in the buyer’s SPV
• There were far fewer auctions
• Many deals required a condition precedent due to the need for regulatory approval
• 2023 will be marked by the application of the new regulation on foreign subsidies that distort the internal market and the Spanish regulation implementing FDI screening
• Locked-box mechanism is consolidated again as the most used pricing mechanism
• Equity tickers continue to grow
• Working capital was the most used financial parameter for the post-closing adjustment
• An 18-month limitation period was once again the most used for business and tax warranties
• Excluding clean exits, the most used liability cap for business and tax warranties is between 20% and 30% of the purchase price
• The granting of business and tax warranties through a management warranty deed is becoming increasingly common
• There are far more anti-sandbagging clauses than pro-sandbagging clauses
• W&I insurance is the most used buyer’s remedy
• The use of arbitration as a dispute resolution mechanism is declining

Portugal: 2022 Market trends at a glance

• Life sciences sector was the most active
• Small and middle market transactions gained traction
• All transactions reviewed were essentially direct investments of private equity funds or add-ons
• Most of the transactions were pure share purchase deals
• Auctions were limited to deals over €100 million
• 2023 will be characterized by the application of the new regulation on foreign subsidies that distort the internal market
• Although the locked-box mechanism is still the most widely used pricing mechanism, its usage has decreased slightly
• Many deals included earn-outs to mitigate future uncertainty
• An 18-month limitation period was once again the most used for business and tax warranties
• The most used liability cap for business and tax warranties is between 20% and 30% of the purchase price
• The use of pro-sandbagging clauses is increasing
• Price retention was the most used guarantee
• Arbitration is the most common dispute resolution mechanism