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Sponsored Briefing: M&A in Portugal during Covid-19

The effects of the pandemic on Portuguese businesses are not uniform.

We can find sectors that have shown some resilience and a capacity to explore the opportunities that have materialised despite everything. Operations that were started before the pandemic are being concluded, such as the purchase of PRISA’s share in the media group Media Capital by Portuguese investors or the purchase of the fuel distributor PRIO by the Spanish distributor DISA.

Other sectors have been more affected. The tourism industry, such as the hospitality sector, aviation and cruises, among others have been seriously affected by the restrictions to the movement of people. Some exporting industries have been struck by the decrease in families’ consumption.

Banking activity has also suffered from the impact of the sudden economic downturn and quarterly results have reflected that downturn and the increase in impairments.

What seems certain is that, despite the current difficulties, there are good opportunities in the market and others will appear in the short and long term future.

The European funds, which will be applied to several activity sectors – for example infrastructure, such as a high-speed train connecting Portugal to Spain – allows new investment opportunities in areas such as projects, constructions and technology supply.

The success of the last solar power plants tender, which included the admitting of new projects with storage capabilities, could also mean some opportunities in the energy sector in the medium term. Government policy regarding hydrogen energy is also a positive sign for the energy sector.

Portugal is still considered as a good ecosystem for the development of new technology projects and this, along with the quality of life that characterises the country (mainly in the big cities near the sea shore) continues to attract an increasing number of entrepreneurs to develop their projects in the country.

That same quality of life has been an attraction factor for high-net-worth individuals and for foreigners that seek a quality of life in Portugal that they probably won’t be able to have in their countries of origin. This has created many opportunities for services to expatriates, in the sectors of specialised healthcare services and services to the elderly, as well as in other support and assistance sectors.

That said, considering the difficulties some companies are experiencing and will experience in the year 2021, it is almost a consensus that in the very near future, probably in 2021, there will be some new opportunities for M&A projects.

However most of those projects will almost certainly require a contribution to the targeted companies’ equity. There is a market for partnerships to purchase just part of the companies’ share capital as well as market to purchase the entire share capital in extremely attractive sectors.

The conclusion of these operations must result in the reinforcement of the equity of the targeted companies and this can be achieved through bank financing, private equity or using existing resources.

As we highlighted, the national banking sector is still anticipating the real impact of the economic crisis on banks’ balance sheets and what will be the effective availability to keep financing the economy in the future.

The role of private equity will therefore be a key one in the future and, despite the important path taken by this sector in Portugal, there is still space for growth and consolidation.

Several business associations have been reporting that international funds are taking up a position to acquire assets (for example hotels, office buildings, industries or exporting companies) that need some renovation and investment in order to place them in a more competitive position in the market.

This type of opportunity, acquiring assets or companies for a fair price and investing in its restructuring in order to repositioning it in the market, are the ones we think are more likely to occur in the future.

From the legal perspective, these operations require local legal support considering the caution needed regarding the assets’ valuation and risks and especially considering the particularities of local laws and regulations.

We foresee that all this will allow for the reanimation of M&A, after this period of some stagnation.

For more important, please contact:

Joana Andrade Correia, partner, Raposo Bernardo

Manuel Esteves de Albuquerque, managing associate, Raposo Bernardo

Raposo Bernardo
Av. Fontes Pereira de Melo,
Ed. Aviz, nº 35, 18º,
1050-118 Lisboa Portugal
T: (00351) 21 312 1330