Local Spotlight: Deal Drivers in Italy, Spain & Portugal

By Suzy Bibko, Content Marketing Manager, EMEA

Southern Europe has been hard hit by the current pandemic. Like other regions, the Q1 figures that looked so promising have since taken a downward turn. Will recovery in M&A take as long as it did with the 2007/08 crisis for this region? And what will drive it forward? At our recent webinar, moderator Rupert Cocke of Mergermarket and our panellists Guido Testa, Pedro Correia da Silva, Christopher Martinez Rubio, and Alvaro Ortega agreed that an atmosphere of cautious optimism is emerging in Italy, Spain and Portugal that should help propel the region forward.

A Pause, not a Full Stop
This is the second recession in a just over a decade for the region. The 2007/08 financial crisis severely affected Southern Europe, and for a long time. And now COVID-19 has again driven M&A to low levels. However, this time recovery is being talked about in the region almost as if it’s imminent – we’ve just taken a bit of pause until we restart. Why are attitudes so different than before?

"This is a temporary, unexpected crisis, rather than a structural one,” explains Martinez Rubio. “The financial system is not in bad health. There is liquidity in the market and I expect it to flow shortly."

Ortega agrees: "Our banks are not in the same situation they were 12 years ago. And even though we see insolvencies and restructurings on the horizon, the banks have those structures that are much more readily capable of cleaning up their balance sheets. From our data we’re seeing yoy growth of 5%-15% in Italy and Spain for projects started, and in Portugal we are seeing a slight decrease in volume, of 5%. So, I’m cautiously optimistic about recovery. There is a lot of hunger, or pent-up demand, to get these deals done."

Restructuring for Recovery
Restructuring looks to play a key role in recovery. And like other regions in EMEA, the good news is that divestitures and debt-financing will dominate, rather than bankruptcy and liquidation. Perhaps this is because government actions that were taken early on are working. 

"In Italy, we have had a number of government decrees aimed at supporting companies; for instance, they can’t dismiss employees until August, no one can apply for liquidation," says Testa. "All these types of measures go towards supporting the Italian industrial system, which is very important because Italy is a highly industrialized country. So, we will hopefully see a stronger and faster recovery of the economy this time around."

"European political decisions will be key in determining the length of the recovery," agrees Correia da Silva. "There is resolve from the central banks and the EU to ensure we do not go to lengthy discussions that have a detrimental impact on recovery."

Moreover, there is a lot of dry powder available, and our experts believe PE will play an important role in recovery of the economy: companies need their money, even as minority stakes, as well as their managerial skills to move forward.

A Tech Revolution
But despite seeing these paths forward, we can’t ignore the fact that most of us still cannot physically move for business. Unsurprisingly, the tech sector in the region has been one of the winners in this crisis, as more and more people are relying on technology to get their jobs done.

"This situation has anticipated a tech revolution and these sectors are winning the investments." says Martinez Rubio. And to make those investments bear fruit, the deals must now be able to be completed virtually. In fact, practitioners believe the ability to complete due diligence remotely is the most important aspect of technology needed to get deals done.

"This demonstrates the new reality we are working in,” says Ortega. “We’ve been assisting the M&A community in getting deals done for over 50 years, but Datasite is especially poised and ready to help you in this situation right now. We have listened to your needs and have the platform and tools to help you do your deals, with speed and efficiency, no matter what stage they are in, no matter where you are. We were built for this situation. And we continue to build to make Datasite work the best for you."

Deal Drivers: Italy, Portugal & Spain Webinar

Hear experts from Italy, Portugal & Spain discuss the current and future state of M&A there, including the challenges, recovery, sector outlooks, and lessons learnt from the current crisis.

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Deal Drivers: Italy, Spain & Portugal

With much of Italy, Spain and Portugal locked down since early March, pursuing M&A activity has been challenging on both strategic and practical levels. How will M&A in the region fare going forward? Find out in our latest spotlight report.

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