Ballester: "Consolidation and build-up strategies are becoming more relevant"

Nexxus Senior Managing Partner Maite Ballester discusses the recent growth in Spanish M&A.

Publicado jeudi, février 10 2022
Ballester: "Consolidation and build-up strategies are becoming more relevant"

LL: What are the biggest changes in private equity that you have witnessed in the last 12 months and what developments do you expect for the sector in the near future?

Ballester: The increase in M&A transactions is linked to private equity. 2019 was a record year in number of transactions and preliminary estimates for 2021 suggest that it has been surpassed.

In Spain, the recovery started in the second half of 2020 and continued during 2021. In the first half of the year, investment increased by 27% in monetary terms compared to the same period in 2020 and by 7% in terms of number of transactions. The pace of M&A transactions has remained high in the second half of the year and is expected to continue in 2022 thanks to the number of transactions that were delayed by the crisis and the expected economic recovery for the coming months.

On the other hand, we are experiencing a notable increase in asset prices in the mid-market segment, a trend that could continue in 2022 due to the high levels of liquidity and the growing presence of international asset managers who are showing interest in Spain.

In which sectors are you seeing the most interest/growth?

Investors are looking for resilient sectors such as IT/technology, agribusiness, energy, and healthcare/wellness. All of them have shown high levels of activity in 2021.

What value does Nexxus bring to its portfolio companies, apart from capital?

We seek to add value to the companies we partner with in several ways. We actively participate, together with our partners, in defining strategy and value-creation plan for the coming years. Thanks to our professional network, we attract talent to reinforce the management team. We help review the company’s organization chart, career, and compensation plans. We implement corporate governance practices for value creation, continuous improvement, and shareholder protection. For example, we always create a board of directors with experience in a specific industry and that is appropriate for the stage the company is in. We support internationalization in Europe and LatAm. Our team has significant experience in Europe internationalization deals, and we have an institutional presence in LatAm through our team in Mexico. We help to develop and implement inorganic growth strategies. We support in the decision making, get involved in the execution, and support the subsequent integration. We help define the optimal exit strategy, pre-selecting suitable candidates and guiding the process in the most effective way.

Finally, ESG criteria are becoming increasingly important. At Nexxus, we apply our responsible investment policy criteria to all the operations we analyze, and design long-term ESG strategies with external advisors. This year, we have published our second sustainability report, where we explain the progress of our portfolio companies in ESG matters and our vision for how we can contribute as a financial partner.

How does the Spanish market compare with countries like France and Germany in terms of consolidation and fragmentation?

Spanish and French companies are similar in terms of size. The average number of employees in Spanish companies is 5.0 while in France it is 5.5. On the other hand, German companies are larger, with an average number of employees of around 12.0.

In this highly fragmented market, consolidation and build-up strategies are becoming more relevant. This, along with good vaccination levels and positive economic recovery forecasts, may maintain high levels of M&A activity in Spain in the coming years.