Megatrends shaping the private equity market

Over the past decade, private equity has seen significant growth in Spain. This surge is due to a positive economic environment, Spain’s growing reputation as an appealing destination for international investors, as well as increased entrepreneurial activity and startup ventures.

Despite the positive developments, the current landscape remains complex and challenging. According to 2023 data, private equity deal values dropped by 37%, exits nearly halved, fundraising fell, and 38% fewer buyout funds closed.

Several factors, including volatility, liquidity issues, capital-raising challenges, and regulatory changes, can globally impact the performance and development of private markets.

However, challenges bring opportunities. New players entering the market and growing interest from existing ones, motivated by strong returns and diversification, create new fundraising opportunities for funds.

The investor profile is evolving after decades of stability. Family offices, for example, now consider private equity an essential asset. Globally, 66% of family offices have alternative investments, constituting only 16% of their portfolios. Goldman Sachs recommends increasing this exposure to 42%, leaving significant room for growth in private markets.

Reduced entry barriers and the digitalization of the investment process are fueling the rise of retail investors. This presents a significant opportunity, as individual investors hold 50% of the world’s wealth, yet they make up only 15% of private market investors.

This broader base will also enhance market liquidity, fostering a more active secondary market.

In summary, the private equity market in Spain is at a crucial juncture. Despite the challenges, numerous and diverse opportunities exist. The ability of private equity funds to adapt to regulatory changes, leverage technological trends, and sustain growth will be critical for future success.

Both investors and fund managers must maintain a strategic and flexible vision, constantly seeking innovation and long-term value creation. With the right approach, private equity in Spain will remain a vital engine for economic growth and business transformation.

 

Eduardo Navarro
Co-founder and President at Crescenta