The market for turnaround funds - Spain

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

Inforamtion

• Number of pages : 30 pages
• Format : Digital and PDF versions
• Last update : 12/04/2023

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Summary and extracts

List of charts

• 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
• LBO/MBO/MBI/LBU trends in Spain
• Number of LBO/MBO/MBI/LBU transactions in Spain.
• Divestment trends (LBO/MBO/MBI/LBU) in Spain
• Number of divestments (LBO/MBO/MBI/LBU) in Spain
• Divestment vehicles used in Spain in 2021 (Total Private Equity and Venture Capital)
• Number of cases of job cuts or creations (over 100) during company restructuring operations
• Number of turnarounds in Europe
• Breakdown of the private equity market in Spain in 2022
• Private Equity in Spain

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