Focus on private equity – Spain and Italy are a pool of ‘little leaders’, Riverside

Despite the current economic climate, Italy and Spain are a pool of ‘little leaders’, small and medium companies which provide very interesting opportunities for private equity firms, according to Juan Barnechea, managing director of origination for Iberia and Italy at Riverside, global private equity firm specializing in leveraged buyouts.

From the firm’s office in Madrid, Barnechea (pictured) heads the European origination team for Iberia and Italy for the REF fund family, and is responsible for managing the firm’s relationships with European lenders.

He tells Investment Europe that leading small and medium companies are increasingly dealing with internationalisation issues, and partnering with a private equity firm could provide them with the right skills to consolidate their market position.

“Italy and Spain are good countries for us. Entrepreneurs should overcome the fear of private equity partners and team up with them,” he says.

Riverside has already made a number of investments in Spain and Portugal, mainly in the telecom and biotech industries, and has invested in Italian swimwear group Arena.

The firm is also chasing new investments both in Spain and in Italy, markets with tempting opportunities for global private equity firms, Barnechea adds.

“Both Italy and Spain are very large economies. Local leading small enterprises are clustered in industrial niches, for example in northern Italy. Spanish firms also have a natural potential to expand in Latin America,” he says.

At the same time, both economies have been severely affected by the sovereign debt crisis, with has created as a consequence a more challenging business environment.

In approaching both markets, Riverside doesn’t apply an extra risk premium.

“We are not penalising investments in those countries for the economic scenario. Of course we take into account the current financial situation, and we have reduced the leverage of our investments. Sometimes we have completed equity only deals at the expense of our returns,” he says.

 

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