Nostalgia may be the watchword in the mergers and acquisitions (M&A) market in Portugal, after two sui generis years with significant increases in the number and value of announced transactions. In 2019, the transactions podium was occupied by the sale of 49,9% of Altice's optical fiber to Morgan Stanley (1,5 billion euros), by the sale of EDP's hydro plants to the consortium that brings together Engie, Crédit Agricole Assurances and Mirova (2,2 billion euros) and for the conclusion of the purchase of NovEnergia (owner of Generg) by Total Eren (427 billion euros). These deals helped the country end the year with 15 deals, which represents an increase of 2018% compared to the same period in 13,4. The total value - taking into account the deals that made the amount public - reached 17,9 billion euros, XNUMX% more year-on-year, according to data from the international directory Transactional Track Record (TTR).

Between January and December 2019, buying and selling operations in real estate (91 announced businesses) and technology (62) stood out. “It would certainly have been the result of the strong increase in demand in Portugal that was already coming from behind and that results from the confluence of the strong growth of Portugal's notoriety in the world (namely as a tourist destination), with the effect of the various public programs to attract investors well-known foreigners, such as golden visas and the tax package for Non-Habitual Residents, ”explains Duarte Schmidt Lino, PLMJ partner to Jornal Económico (JE).

In the opinion of João Sousa Leal, partner of the consultancy KPMG, this phenomenon in real estate - even so, with 5% less transactions than in 2018 - is related to the idea on the part of investors that Portugal still provides levels of profitability and risk more competitive than in the rest of Europe. “The high liquidity provided by central banks in recent years has led investors in the real estate sector to find it increasingly difficult to find assets that provide adequate levels of profitability to remunerate their shareholders. Portugal, although yields are decreasing from year to year, still provides higher yields in this asset class, he points out, in declarations to JE.

This includes the company Invesco, which bought three hotels in Lisbon from Mint Thais) the Tivoli Avenida Liberdade Lisboa, the Tivoli Oriente Lisboa and the Avani Avenida da Liberdade) for 313 million euros - a transaction that soon went to ' Top 10 'of the TTR. For Paulo Trindade Costa, a partner at Vieira de Almeida, the high values ​​associated with the real estate sector are justified by the “almost lack of investment in previous years”, a consequence of the 2008 financial crisis, which was followed by a high rise in demand. In addition, this activity segment was driven by low interest rates and the “recovery of the financial system, which maintained the appetite for the granting of real estate loans, the consolidation of the tourist market (exponential increase in the hotel offer, the phenomenon of short-term rental and the revival of some major projects) and the increased capacity to attract new foreign residents ”. In relation to technology companies, the Web Summit, the qualified resources of the Portuguese in IT and the competitive installation costs compared to other geographies can be grateful for dynamism, according to the same lawyer.

There was also room for at least 46 businesses in the financial sector in 2019, which meant an increase of 18% over the previous year. On the list is, for example, the Italian Generali, which reached an agreement with Apollo to buy all of Seguradoras Unidas (600 million euros) - an operation that was closed earlier this year. In energy, the highlight was also for the Calouste Gulbenkian Foundation, which concluded the sale of the Partex oil company to the PTTEP Thais for around 575 million euros.

The more than four hundred M&A operations had dozens of figures behind each one. In addition to the faces of companies, law firms and investment banks have supported their clients' transactions for months - some more than others. Morais Leitão, Uría Menéndez - Proença de Carvalho and Cuatrecasas (for the value of legally supported operations), PLMJ, Antas da Cunha and Garrigues (for the number of legally supported operations) stood out in legal advice. On the financial side, the TTR table was headed by Arcano Partners, Mediobanca and Citigroup (in value), Haitong Securities, Crowe Portugal and again Arcano Partners (in number).

Investors, companies and advisors did not anticipate that a global pandemic (Covid-19) could halt the good foreshadowing of 2020 (see article on M&A published in the January 10 JE). The experts now contacted do not change their predictions circumstantially, but show less certainty that all operations announced at the end of 2019 will move forward. “We are beginning to see the current pandemic outbreak being cited by several stakeholders as one of the main drivers for postponing or canceling several M&A transactions that were already in advanced stages of due diligence or bidding, namely in operations involving stakeholders from various countries, ”says Paulo Garrett, managing partner of Globalwe, who adds that this situation has evolved since the beginning of the year, when there were constraints only in the transactions of companies with direct or indirect connections to China.

In fact, until the end of February, 52 transactions by Portuguese companies were identified, which represents a decrease of 12% in relation to the same period in 2019. Only the total amount handled added up to 3,03 billion euros, plus 39% year-on-year.

Maria João Mata and Catarina Santinha, from Miranda & Associados, believe that the willingness of investors to carry out operations depends on the stage they are in, the capacity that companies have had to create “financial pillows” in recent years, the response of governments and the duration of the Covid-19 pandemic. “There are transactions in progress, announced or not, some already with signed contracts and which are in the stage of verifying conditions, obtaining authorizations or similar, and others in the pre-formalization phase, whose financing was already outlined and completed, which they will hardly be called into question ”, guarantees the partner and associate. Therefore, they believe that “the overwhelming majority” of large transactions announced between the end of 2019 and the beginning of 2020 will advance - only the Cofina / Media Capital marriage seems to be more compromised. Ana Sofia Batista and Manuel Santos Vítor, partners at Abreu Advogados, share the same opinion and give another example: “The markets in Angola and Mozambique, which are very important to us, are not affected by this problem”. “Mobility difficulties are also relevant considering that, in most cases, foreign investment operations continue to predominate. Investors will have to deal with the difficulties in their home countries and in Portugal. We will see in the coming days and weeks the operations that will be suspended, to be resumed later, and those that will have to be canceled ”, stress the lawyers.

Source: O Jornal Económico - Portugal