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Joana Andrade: “The Portuguese market is still interesting for foreign investors.”
Raposo Bernardo partner, Joana Andrade outlines the benefits for foreign investment in Portugal and how the M&A market is still strong.
Leaders League: How do you see the current M&A market in Portugal?
Joana Andrade: As in many other countries, the M&A market in Portugal is learning how to cope with the new times. The odd period of almost 10 years where prices and interests were stable and low has now come to an end.
The uncertainties created the both the pandemic and now the ongoing war in Ukraine, including disruption in distribution and logistics routes are having an effect on the market both from the offer and the buyers’ side.
Although these are times of uncertainty and the beginning of 2022 the M&A market was a bear market, there will still opportunities. Volatile markets usually present good business opportunities. It’s just a question of being financially prepared and be ready to seize opportunities at the right time and on the right place.
Good business possibilities still exist in Portugal. If you have prepare yourself in advance, study the market, the legal environment, gather the right team you can seize them quite swiftly when they become mature.
Leaders League: How will rising interest rates affect deal flow and valuations?
Joana Andrade: Rising interest rates affect the M&A market in very different ways.It’s a well-known fact that increased financial uncertainty and rising interest rates and inflation tend to impact valuations negatively. At the same time, companies with less solid finances may find themselves struggling when obtaining new credits or to meet the present liabilities. This could lead to situations where they will try to resort to M&A operations in order to cope with the difficulties.
It is also important to note that cash based deals will most probably decrease and that we will have more cash/equity or shares transactions. Paying part of the price with equity/shares will once again prove to be a solution in times were monies are more expensive.This will lead to situations where the previous owners will keep a part in their companies with all the benefits and challenges this may cause.
Leaders League: How much appetite are you seeing from international investors, and which countries are the most active?
Joana Andrade: The Portuguese market is still interesting for foreign investors.Of course it is not a huge local market, however, Portugal is an EU member with a very open economy active in all the corners of the world. We are accostomed to dealing with foreign investors who have always been very welcomed in our country.
“Our younger generation of professionals are proving to be well qualified.”
The labor costs in Portugal are generally lower than the costs in other EU member states and our younger generation of professionals is proving to be well qualified. All these factors put Portugal in the agenda of many foreign investors. Traditionally Portugal main investors were companies based in other EU countries. Nowadays it is more frequent to find investors from the USA, the Far East (China and India, for example) and from many other origins willing to invest in Portugal.
Leaders League: Which sectors in Portugal are the most attractive to foreign acquirers?
Joana Andrade: The beginning of 2022 brought a decrease of M&A operations both in value as in number of operations concluded.There were no major multi-million deals but the diversity of sectors involved was still important. Industrial companies, energy companies, real estate, telecoms or financial/insurance companies were involved in these transactions.
“Portuguese technological based start-ups present very attractive opportunities to foreign acquirers.”
One must not also forget that the technology and start-ups ecosystem is very active in Portugal. Portuguese technological based start-ups also present very attractive opportunities to foreign acquirers.
Portugal is a well-known and mature M&A market, nevertheless local projects clearly benefit from local insight and including local experts in the team will most certainly be beneficial for the success of the deals.
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