Summary of our market study

Since 2020, the turnaround funds market in Spain has been experiencing growth, bolstered by the new Ley Concursal effective from 01/01/2023 which aims to streamline restructuring or liquidation for insolvent companies. Despite the impact of the COVID-19 pandemic, which led to a 2.50% drop in the number of business bankruptcies in 2020 thanks to government measures, the turnaround fund sector remains an emerging niche within the larger private equity market. In Europe, industry sectors continue to lead in turnaround operations, with 101 turnarounds in 2021. In Spain, around ten turnaround fund operators are present, with the industry sector representing 3.87% of Spanish business bankruptcies in 2020. The Spanish turnaround capital activities are fairly new, concentrated in a few companies, with a total investment of €73,600,000 distributed across 6 deals in 2022, accounting for 0.8% of private equity investments in the country. The favored targets are primarily SMEs, which account for 90% of private equity and venture capital transactions anticipated by ASCRI for 2021. The overall private equity market in Spain has shown resilience, with investments reaching €9.200 billion by 2022 after a sharp pandemic-induced decline, indicating a recovery and ongoing development in the sector..Spain's Turnaround Fund Market: Insights and Growth amid Economic Resilience Spain's turnaround fund market, characterized by its focus on rescuing and revitalizing struggling businesses, shows a promising landscape with a blend of emerging sectors and regulatory support. The market, while still in its nascent stage, is marked by approximately ten active operators engaging in around ten deals annually, revealing a cautious yet growing environment for these specialized funds. The demand for turnaround funds in Spain appears to be driven by the historical impact of the 2008 financial crisis, leading to a cautious approach from both Spanish and international creditors. This market primarily caters to small and medium-sized enterprises (SMEs), which are seen as lucrative investment opportunities due to their size, capital access, and non-public status. It is observed that around 90% of private equity and venture capital transactions will target these SMEs by 2021, indicative of a strong inclination toward this segment. An important trend in the Spanish market is the fluctuating rate of business failures, which directly impacts the demand for turnaround funds. From 2010 to 2020, the country experienced an oscillation in business failures, with a notable increase between 2014 and 2019. The following year, the number of bankruptcies dropped by roughly 2.50% compared to 2019—a decline attributable to governmental economic measures during the COVID-19 pandemic. Interestingly, a significant proportion of these bankruptcies were companies without employees, which rose to more than 75% in 2020, suggesting that smaller businesses without additional labor forces are more susceptible to failure. The sectors most affected by bankruptcies were services, trade, construction, and industry, in descending order of prevalence. In response to these trends and the need for a more facilitative environment for private equity, Spain introduced a new bankruptcy law, "La nueva Ley Concursal," effective January 1, 2023. This legislation is anticipated to bolster the development of the private equity sector and turnaround funds by streamlining restructuring processes and offering tools to companies facing financial difficulties. On the European front, Spain's turnaround activities align with larger continental trends, with industry leading in the number of turnarounds. Sectors like telecommunications and retail also play substantial roles, but the precedence of industry points to a pivotal area of focus for turnaround funds. Overall, the Spanish turnaround funds market represents a specialized niche within the broader domain of private equity. With the market's fundamental shifts and regulatory enhancements, the sector is positioned for growth. The introduction of the new.### Profiling Key Players in the Spanish Turnaround Fund Landscape The Spanish turnaround fund market is a specialized niche within the broader private equity sector, focusing on the revitalization of distressed businesses. Though representing a smaller slice of the overall private equity pie, several key players operate within this space, each with its unique approach and focus area. Let's delve into the profiles of these notable turnaround funds that are shaping the Spanish market: #### PHI Industrials - PHI Fund III PHI Industrials stands out with its PHI Fund III, bringing an 80 million euro war chest to the table. This fund targets companies across various sectors with the exception of real estate and financial industries. PHI Industrials is proactive in the turnaround realm, aiming for between 7 and 8 acquisitions, offering a beacon of hope for businesses in dire need of restructuring and new strategic direction. #### BlackPearl Capital Partners Tailoring its approach to the specific needs of small and medium-sized enterprises (PYMES), BlackPearl Capital Partners operates with a fund size of 70 million euros. BlackPearl's selections are strategic, preferring to assist companies that show the potential for profitable reinvention. #### Sherpa Capital - Sherpa Special Situations III Sherpa Capital distinguishes itself with the Sherpa Special Situations III fund, which is sizable at 120 million euros. Their target companies typically boast capital ranging from 10 to 25 million euros, with sales figures hovering between 20 and 300 million euros. Sherpa's involvement often means a fresh lease of life for Spanish companies across various industry sectors. #### H.I.G. European Capital Partners - HIG Capital With an impressive 4,500 million euros, including all private equity operations, HIG Capital of H.I.G. European Capital Partners has substantial backing for turnaround endeavors. Investments made by H.I.G. range between 10 to 250 million euros, showcasing their capacity to operate on a significant scale within the private equity landscape. #### Kohlberg Kravis Roberts (KKR) España Asesores KKR España Asesores brings a massive 30.092 million euros to the table. Although details on their specific turnaround fund size or focus are not clear, their presence in the market signifies a strong available resource for potential restructuring projects. #### Noso Capital - NOSO CAPITAL I FCR-PYME Noso Capital, engaging with the NOSO CAPITAL I FCR-PYME fund, maintains a preference for SMEs and covers a diverse array of
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Summary and extracts

1 Market overview

1.1 Definition and presentation

Turnaround funds, also known as capital turnaround funds, are funds that specialize in taking over bankrupt companies to turn them around and return them to viable economic activity. For these funds, the aim is to provide the financial and human resources needed to get the company back into business.

In Europe, there are numerous private equity (PE) firms specializing in leveraged buy-outs (LBOs) and buy-outs, and, to a much lesser extent, in turnarounds. In Europe, industry remains the leading sector for turnaround funds. Looking ahead to 2021, the industry sector will account for 101 turnarounds, well ahead of the telecoms (58) and retail (64) sectors.

In Spain, turnaround funds are an emerging sector. Around ten operators are currently on the market, and the country only accounts for around ten deals a year. The 2008 crisis has had a lasting impact on Spanish and international creditors, and real estate is often excluded from these turnaround funds. Nevertheless, the new institutional framework set up by "La nueva Ley Concursal" (the new bankruptcy law), applicable from 01/01/2023, should facilitate the development of the private equity sector and these funds in the country.

1.2 Restructuring in Europe concerns millions of workers

There are many private equity funds in Europe. These funds have substantial resources at their disposal, enabling them to invest in LBOs (***) in companies that are doing more or less well. Turnaround is generally not their core business, and is therefore relatively neglected. Acquisitions tend to be made in companies with ...

1.3 The market for turnaround funds: a niche within private equity

The private equity sector appears to be growing and developing in Spain. If we exclude the years **** and ****, years impacted by the covid ** crisis, we obtain a ***.**% growth in investments made by the sector between **** and ****. The sector expanded strongly between **** and ****, with an increase in investment value of just **.**% between ...

2 Demand analysis

2.1 Business failures in Spain

Between **** and ****, several trends can be observed in the number of business failures in Spain. Firstly, it is remarkable that over this period, the number of business failures oscillates from a low of ***.* thousand in ****, to a high of ***.* thousand in ****. The average number of business failures over the period is ...

2.2 The preferred targets of turnaround funds

By virtue of the way they operate, turnaround funds focus mainly on SMEs -PYMES in Spain. These companies are favored by these funds because their characteristics make them particularly profitable to invest in: limited size, making access to capital possible; unlisted shares, enabling private financing. ASCRI (***) estimates that, by ****, **% of private ...

3 Market structure

3.1 Turnaround activities in private equity

Private equity activities can be divided into * main types of fund. The aim of these funds is to support the development and sustainability of a company. In the case of turnaround capital funds, the aim is to make a massive investment in a company to help it emerge from the crisis, ...

3.2 Turnaround players in Spain

Business turnaround remains a particularly complex sector, requiring a thorough understanding of the law and relevant technical skills, among other things. The chart below shows the echosystem of professions within Spanish turnaround funds.

Each player has a role to play at different stages of the turnaround process. Court-appointed receivers, for example, ...

4 Offer analysis

4.1 Turnaround funds in Spain

Turnaround funds always make a capital contribution that enables them to take control of the company, or at least to have decision-making power. This contribution also enables the company to steer its strategy and initiate the restructuring process. Sometimes, debt is added to the investment to enable the turnaround fund to ...

4.2 Exit procedures

When an investment fund (***) wishes to recover the profits from its investment after several years, there are several possible ways to divest:

Initial public offering Sale to a manufacturer Sale to another investor Selling the company to the management team Etc...

In **** in Spain, of the *.*** billion euros divested (***).

Means of ...

5 Regulations

5.1 Changes brought about by the reform of the Ley Concursal

The new Ley Concursal, which came into force on **/**/****, governs insolvency procedures for all types of debtor, whether natural or legal persons. Its aim is to ensure the efficient and rapid reallocation of productive resources in the event of a company's insolvency. The law speeds up the process of restructuring or ...

6 Positioning the players

6.1 Segmentation

  • H.I.G. Europe
  • BDO
  • Norgestion
  • Noso Capital
  • BlackPearl Capital
  • PHI Industrial
  • Sherpa Capital

List of charts presented in this market study

  • Company bankruptcies in Spain
  • Spanish corporate insolvencies by sector in 2020
  • Company bankruptcies in 2020 in Spain, by size of business
  • The origins of turnaround funds in Spain
  • How an LBO works: the fund repays the borrowed debt using the company's cash flow
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Latest news

June partners: Consulting firms: the raid by the big on the small continues | The great predation continues - 14/09/2023
  • June Partners, a small French structure, has 80 employees and 11 partners, and generates sales of €20 million.
  • BDO France has carried out 10 external growth operations, equivalent to 50 million euros in sales.
  • In two years, BDO France's sales have risen from 140 to 220 million euros. The Chairman of BDO France, Arnaud Naudan, is aiming for sales of 300 million euros within five years.
  • Consulting accounts for 50 million euros in sales for BDO France.
  • BDO claims the number one position in the mid-market segment for SMEs and ETIs worldwide.
BDO becomes France's first audit consulting firm - 15/12/2017
  • BDO France reports 8% growth for fiscal year ending September 30
  • Adoption of new articles of association as a mission-driven company
BDO France says it is ready for consulting - 16/04/2017
  • BDO Group: 1,200 employees in France (43% of whom are managers and executives)
  • In 2017, public accounting accounted for half of the business
  • auditing (20%)
  • social services (16%)
  • consulting (14%)
Arnaud Naudan, on assignment at BDO - 24/01/2017
  • BDO France's seventh-largest law firm
  • 170 million euros in sales and 1,500 employees
  • Objective: double in size within 5 years
  • CEO Arnaud Naudan targets three to five acquisitions a year
New CEO for BDO France - Capital Finance - 21/01/2017
  • Arnaud Naudan appointed CEO of audit and consulting firm in France

Companies quoted in this study

This study contains a complete overview of the companies in the market, with the latest figures and news for each company. :

H.I.G. Europe
Noso Capital
BlackPearl Capital
PHI Industrial
Sherpa Capital

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