Private equity funds in Spain face ‘internationalisation challenge’

Madrid-based King & Wood Mallesons partner Isabel Rodriguez leads the only dedicated law firm funds formation practice in Spain, she spoke exclusively to Leaders League about the internationalisation challenge faced by private equity funds.

Publicado Sunday, December 1st 2019
Private equity funds in Spain face ‘internationalisation challenge’

Isabel Rodriguez

Though the Spanish private equity market is mature, in the view of King & Wood Mallesons (KWM) partner Isabel Rodriguez there are a number of emerging opportunities. In the days before our interview, Rodriguez says the firm has received four new proposals. She adds: “You are seeing new types of funds, such as energy transition funds, ‘gender funds’, and agrifood funds.” With regard to ‘gender funds’, at the end of last year KWM advised RED Capital Partners, a venture capital firm with offices in Madrid and Tel Aviv, on the structuring of its fund RED Ventures Fund I, the first investment vehicle in Spain aimed to invest exclusively in companies led or co-led by women – the fund had a target size of €50 million.

Meanwhile, with respect to the agrifood sector, in recent weeks KWM advised Miura Private Equity on the launch of Frutas, a €350 million fund founded in Spain that is focused on the European agrifood sector. Setting up international funds such as this is one of the biggest challenges private equity funds face, according to Rodriguez. “Becoming more international is more tricky,” says Rodriguez. “It’s not easy to sell abroad.” However, she adds: “Having a different geographic focus is a way of becoming bigger, and this is the next step in the Spanish market.”

The climate is right for international expansion. Rodriguez says: “With regard to pursuing new opportunities, LPs are ready to accept an expansion of business.” In general, funds are diversifying their strategies by taking small stakes in small companies, for example, Rodriguez says. She continues: “Perfectly distinct strategies can coexist under the same management as long as there is a clear focus, the global strategy of both management and the fund is well-defined, and the team can cover all eventualities that might arise.”

With a significant number of funds having been established in Spain in recent years, Rodríguez says that the private equity industry now constitutes an identifiable sector in the country. KWM recently highlighted the findings of a report by the Instituto de Crédito Oficial (ICO), which evaluated the economic and social impact of private equity in Spain. The report compared companies who received funds from private equity to those that do not. On average, companies that did receive revenue from private equity recorded 18 per cent more turnover and 30 per cent more employment. Funds in Spain are now very sophisticated and, according to Rodriguez, the fact they are handling a significant volume of business “proves the business has matured, consolidated, and is here to stay and play a key role in the coming years”.