Fran Hidalgo-Barquero, Partner at ALBIA IMAP
First of all, it should be noted that although the interest of Private Equity funds in Spain is a relatively new phenomenon, this is not the case in other geographies. In countries such as the United Kingdom, this sector, across all its segments, is well established among this type of investor. In fact, Tresmares Capital, one of the most important asset managers in Spain, has supported the execution of numerous transactions in that market (such as Affinia Group).
In Spain, after several years of independent consolidators operating under the radar, such as Afianza, the entry of Ufenau into Sagardoy, along with other platforms such as Auxadi, Legálitas, and Adlanter, brought the sector into the spotlight. Furthermore, transactions involving Waterland and Auren, as well as the recent direct lending deal between BlackRock and Afianza, have ultimately established in the minds of market participants that this is an active sector from a corporate perspective.
All of this points to the fact that current activity is more a reflection of the maturity of our market—both in terms of the broader economy and the evolution of Private Equity itself—as well as the growing competition among funds. Why go through the effort of building a platform through, for example, five acquisitions, when there are sectors where the path to IRR and MOIC is much more straightforward? Today, this is no longer so simple, as evidenced by the return of domestic funds—originally focused on the lower middle market—back into this segment.
That said, it is undeniable that certain fund-driven trends make this sector attractive, at least from a growth standpoint, which remains a key lever for value creation, particularly in the current environment of intense competition among asset managers.
From our perspective, the most interesting niche is BPO (Business Process Outsourcing), commonly known as administrative service providers, covering accounting, tax, and payroll services. The main reason lies in their integration into companies’ back-office functions, spanning financial management, human resources, and even technology. This provides a strong guarantee of recurring revenue and long-term relationships. In turn, this reduces reliance on key individuals, unlike what typically occurs in law firms.
Given the diversity of services offered by these companies, we are curious to see how future exits will unfold, although we would expect secondary buyouts. The recurring nature of a large portion of their services makes these companies particularly attractive. On the downside, talent retention and incentive structures have traditionally been challenging.
More insights in Cristian Reche.’s latest article in elEconomista:
