This chapter provides an overview of private equity trends in Spain and offers a comparison with selected European peer countries. It presents a detailed analysis of the three main stages of private equity activity: fundraising, investment and divestment. The analysis addresses key issues relevant to the geographical and institutional source of fundraising, the industry distribution of investments and divestment forms.
OECD Capital Market Review of Spain 2024
Capital Markets for a Vibrant and Sustainable Spanish Economy and Corporate Sector
Abstract
Globally, private capital markets have grown significantly in recent years, driven by low interest rates, high credit availability and rising valuations. Private capital markets were resilient during the pandemic: activity was negatively impacted in the first half of 2020 but picked up again in the second half and remained high throughout 2021. In 2022, as central banks increased interest rates to counter rising inflation, public market valuations dipped and deal activity in the private market decreased substantially. Despite a slowdown in 2022 and 2023, total assets under management (AUM) in private capital markets had reached USD 13.1 trillion by the end of June 2023. Private equity (PE) is by far the largest asset class in global private capital markets, representing USD 8.2 trillion in AUM (McKinsey & Company, 2024[1]). Private equity and venture capital serve as an alternative source of financing for non‑financial corporations, notably for start-up firms, private medium-sized firms, firms in financial distress and public firms seeking buyout financing.
This chapter provides an overview of private equity trends in Spain and offers a comparison with selected European peer countries. It presents a detailed analysis of the three main stages of private equity activity: fundraising, investment and divestment. The analysis addresses key issues relevant to the geographical and institutional source of fundraising, the industry distribution of investments and divestment forms.
There are three main stages in the PE investment process. The initial stage is fundraising where general partners of the private equity firms raise funds from investors, including institutional investors and high net worth individuals. In the second stage of the process, funds are invested in companies at different stages of their lifecycle. Private equity funds generally have a defined investment horizon within which they are expected to exit their investments. Divestment, the third stage of the process, occurs when PE firms sell their stake in investee companies. There are several options for PE funds to divest their holdings, including initial public offerings, sales to a strategic industry buyer, or to other private equity firms.
Despite uncertain macroeconomic conditions, total fundraising in Europe in 2022 reached the highest amount ever recorded of EUR 195 billion and the amount of capital invested in European companies was EUR 133 billion, the second highest level recorded and 30% above the average for the previous five years. In 2023, total fundraising and investment decreased to respectively EUR 132 billion and EUR 100 billion. In contrast, the divestment stage of PE was the most affected by low liquidity and declining valuations in 2022, falling roughly 27% in terms of volume and 17% in number of companies exited. Volume fell by a further 16% in 2023 (Figure 6.1, Panel A).
Between 2013 and 2023, Spanish PE firms raised EUR 22 billion, representing 2% of the total amount of PE capital raised in Europe. This figure is the lowest among peer countries. However, Italy, the Netherlands and Germany’s shares are only just above Spain, accounting for between 3-5% of total European private equity capital. On the other hand, Swedish and French PE companies have been significant contributors to European PE, accounting for 9% and 17% respectively of total capital raised by European PE firms (Panel A).
During the same period, PE investment in Spanish companies averaged EUR 5 billion per year, representing 6% of total investment in European companies (Panel A). From 2007 this figure ranged from 4% in 2015 to 9% in 2019 (Panel B).
Spain’s divestments between 2013 and 2023 amounted to EUR 29 billion, representing 7% of total divestment in European companies. The comparison among peer countries shows a similar picture to that of PE investment: France (21%) and Germany (12%) account for the highest share; Sweden (5%) shows the lowest figure; and Italy, the Netherlands and Spain rank just above Sweden, ranging between 6% and 7% of total European divestments (Panel A).
To put these figures into context, since 2007 the shares of Spain PE investment and divestment in total European values have generally been below Spain’s contribution to Europe’s GDP. Investment in Spanish companies as a share of total European investment has surpassed Spain’s share of Europe’s GDP only in 2018 and 2019. Notably, while in 2022, due to the economic uncertainty, total European PE investments decreased by 11% compared to 2021, PE investment in Spanish companies increased by 24%, resulting in Spain’s share of European investments being 7% (Figure 6.1, Panel B). In 2023 total European PE investments decreased by 25%. PE investment in Spanish companies decreased by slightly less (22%).
Note: The private equity activity in Panel A is calculated as the ratio between the selected country and total European activity amounts.
Source: Invest Europe.
Comparing PE activity as a share of GDP, rather than as a share of Europe’s activity, provides a similar picture. PE fundraising is below European levels – over the last five years, European fundraising activity represented, on average, 0.74% of GDP, while Spanish private equity firms raised only 0.20% of GDP (Figure 6.2, Panel A). Investment and divestment are more in line with European levels (Panels B and C).
However, in a cross-country comparison, PE fundraising, investment and divestment activities in Spain lag behind that of France, the Netherlands and Sweden.1 PE fundraising in the Netherlands and France represent a share of GDP close to the European aggregate (0.74%), while the corresponding figure for Sweden is as high as 2.7% of GDP. However, there is more PE fundraising activity in Spain than in Germany and Italy.
Although PE investment and divestment in Germany between 2019 and 2023 accounted for 14% and 11% of European totals, respectively, when scaled by the country’s GDP, PE investment and divestment in the country are the lowest, representing 0.43% and 0.11% of GDP, respectively. The opposite is true for Sweden in the same period: despite Swedish PE investment and divestment representing the lowest share of the European total (4% and 5% respectively) (Figure 6.1, Panel A), PE investment and divestment activities in Sweden as a share of GDP are among the highest, at 1.05% and 0.38% respectively (Panels B and C).
Note: The shares represent five-year averages between 2019 and 2023.
Source: Invest Europe.
Spanish PE firms mostly rely on domestic investors when raising funds. Between 2019 and 2023, 74% of the committed capital in Spain was raised from Spanish investors, more than twice as high as the domestic share of 29% in Europe (Figure 6.3, Panel A). Non-domestic European and non-European investors show modest participation in Spanish fundraising. Non-European investors accounted for just 3% of the committed funds in Spain, against a 44% European share (Panel C). The dominance of domestic investors and low participation of non-European investors is common across countries, with the exception of Sweden, where the opposite is true; 9% of funds were raised from domestic investors and 63% from non-European investors (Panels A and C). In relation to non-domestic European investors, countries show less variation, with this class of investors accounting for the highest share in Germany (39%) and the lowest in Italy (13%), while representing 22% of the capital raised in Spain (Panel B).
Note: The analysis only includes fundraisings where the origin of the investor is specified.
Source: Invest Europe.
Between 2019 and 2023, individual investors were the largest investors in Spain, providing 35% of total funds raised, followed by the public sector and sovereign funds (28%) and fund of funds (10%). In contrast, in Europe, individual investors accounted for only 12% of the capital collected in the last five years, while pension funds were the largest source of funds, contributing 22% of total PE funds raised. Compared to the other European peer countries, as well as Europe as a whole, Spain shows the lowest participation of pension funds in the funds raised and the largest participation of individual investors (Figure 6.4).
Source: Invest Europe.
PE firms generally specialise in either buyout, venture capital or growth investment. As of June 2023, buyout activity accounted for 47% of global AUM, while venture capital and growth represented 33% and 17%, respectively (McKinsey & Company, 2024[1]). The buyout segment of PE markets provides funds for the acquisition of more mature companies to improve their operations, thereby enhancing the efficiency and increasing the valuation of the company. Generally, the buyout segment of PE investment focuses on under‑performing companies, with the investment aiming to foster corporate restructuring and enhance productivity (Blundell-Wignall, 2007[2]). Buyout transactions typically involve high levels of debt financing, with the aim of acquiring a controlling share of the company to facilitate the restructuring process. Venture capital investors typically focus on early‑stage firms, such as companies in technology‑intensive industries, which may have difficulties raising funds from the banking sector or the primary financial markets owing to a lack of tangible collateral and/or historical financials. An efficient venture capital market contributes to economic growth, job creation and long-term competitiveness by enabling access to financing for high‑growth firms (ECB, 2005[3]). The growth segment of PE refers to investment in relatively mature companies that require capital for their growth objectives.
Among different types of PE investments, buyout transactions represent the highest percentage of the total investment value in all countries analysed. In Europe, buyout deals accounted for 66% of PE investment between 2013 and 2023. A cross country comparison shows that the share of buyout deals ranged from 60% of investment in France to 79% in Italy, and 67% in Spain (Figure 6.5, Panel A). In Europe, the second most common form of investment is growth, accounting for 20% of total transaction amounts, followed by venture capital (11%). Across the selected European countries, France has the highest share of growth transactions (31%), with shares in other countries ranging between 12% (Italy) and 17% (the Netherlands) of total PE investment. Venture capital is the least common type of investment form, accounting for 11% of both total European and Spanish investments in the last ten years.
Since 2007, buyout investment has accounted for the largest share of transaction amounts in Spain, except in 2008 and 2009, when growth was the most common form of PE investment. However, in the last three years, the share of buyout investment decreased, while both the percentage of transactions in the growth and venture capital segments surged, with the former showing a more significant increase (Panel B).
Note: Panel A shows shares by deal value.
Source: Invest Europe.
During the 2019-23 period, 80% of PE investment in European companies was concentrated in three sectors: biotech, healthcare, computer and electronics; consumer goods and services; and business products and services. Even though these three industries were the largest recipients of investments in all selected European peer countries, in Spain only 9% of investments was in the business products and services sector, while 15% of total PE investment was in energy and environment companies, the biggest industry share among peers (Figure 6.6).
Note: Shares by deal value.
Source: Invest Europe.
The final stage of PE investment is divestment, where PE funds exit their investments at the end of the fund’s lifecycle. There are several forms of divestments including sale through public offerings, sale to other PE firms or other financial institutions, sale to a strategic industry buyer, buyback by managers or owners, repayment of preference shares/loans and write-offs.
In 2023, divestments in Europe amounted to EUR 31 billion, with 3 094 companies divested, a 27% decrease in volume and a 12% decrease in number from 2022 and 24% from 2021 (Figure 6.7, Panel A). Although the effects of the low liquidity and low public valuation environment were less pronounced in Spain in 2022, in 2023 divestments decreased by 40% from the 2022 level, and the number of companies fell from 407 to 285 (Panel B). Overall, divestment volumes in Europe and Spain have been showing a downward trend since 2015 and 2014 respectively. The exception to that trend in Europe was 2021 when there was a surge in the amounts divested. However, the number of companies divested has been quite stable both in Europe and in Spain, suggesting that the variations in volumes were mostly driven by changes in the valuation environment, rather than the number of transactions (Panels A and B).
Source: Invest Europe.
In Europe, sale to another private equity firm and sale to trade buyers were the most common between 2019 and 2023, accounting for 36% and 29% of the total aggregate divestment value, respectively. The same is true for Spain and all selected European peer countries, except for Sweden, where divestment by public offering is another important form of exit for private equity funds. In Spain, sale to another private equity firm and sale to trade buyers accounted for 65% of total divestment. Compared to European peer countries, Spain is among the countries with the lowest share of divestments by public offering, while presenting a higher share of management/owner buy‑back divestments (Figure 6.8).
Note: Shares by deal value.
Source: Invest Europe.
References
[2] Blundell-Wignall, A. (2007), “The Private Equity Boom: Causes and Policy Issues”, Financial Market Trends, https://doi.org/10.1787/fmt-v2007-art4-en.
[3] ECB (2005), “The Development of Private Equity and Venture Capital in Europe”, ECB Monthly Bulletin October 2005, https://www.ecb.europa.eu/pub/pdf/other/mb200510_focus02.en.pdf.
[1] McKinsey & Company (2024), McKinsey Global Private Markets Review, https://www.mckinsey.com/~/media/mckinsey/industries/private%20equity%20and%20principal%20investors/our%20insights/mckinseys%20private%20markets%20annual%20review/2024/mckinsey-global-private-markets-review-2024.pdf?shouldIndex=false.
← 1. While fundraising refers to PE investment funds that primarily focus on investments in Europe, the other two statistics refer to investment in European companies (regardless of the origin of the PE firm) and divestment of European companies (regardless of the origin of the PE firm).