49
STATE AGENT BANK ECONOMIC POLICY ACTIVITIES / BUSINESS UNITS Astana, 28 th May 2014 ON-LENDING DIRECT LENDING VENTURE CAPITAL PROMOTING CREDIT & VENTURE CAPITAL IN SPAIN
STATE AGENT BANK ECONOMIC POLICY
ACTIVITIES / BUSINESS UNITS
Astana, 28th May 2014
ON-LENDING DIRECT LENDING VENTURE CAPITAL
PROMOTING CREDIT & VENTURE CAPITAL IN SPAIN
• Instituto de Crédito Oficial (ICO) was founded in 1971
• ICO is a State-owned bank with its own legal status, equity and cash assets. It is self-governed and is attached to the Ministry of Economic Affairs and Competitiveness.
• It has the legal status of a financial institution (a regulated Bank) and it is also classified as the Government Financial Agency.
• ICO is subject to market banking practices under the same rules and regulations as any private bank: International Financial Reporting Standards (IFRS), Basel prudential standards, Bank of Spain supervision etc.
• As a Bank, ICO obtains its funding in the international debt capital markets, and not from the Government Budget. ICO’s balance sheet is not consolidated with the Government (ESA95).
• ICO’s liabilities have the unconditional guarantee from the Spanish Government, and benefits from the Sovereign Credit Rating:
Standard & Poors BBB Stable May 2014
Fitch BBB+ Stable April 2014
Moody’s Baa2 Positive Feb. 2014
BACKGROUND
1
2
Three Principles:
1. COLLABORATION: Public-Private 2. SIMPLICITY: Scalability & Technology
3. TRANSPARENCY
Public-Private Partnerships, under as simple as possible and transparent schemes, in order to mobilise the private initiative, so that ICO acts as a tool for injecting liquidity and as a promoter of bank credit and non-bank financing.
3
ACHIEVEMENTS SINCE JANUARY 2012
1. €125 billion (USD 170 billion) of new
credit injected through different
schemes, financed from Treasury, ICO,
Private Banks and international Debt
Capital Markets
2. 70% of this credit was directed to
inject liquidity to SMEs and Enterprises
(more than 350.000 loans signed)
3. €4.5 bn mobilized of Private Venture
and Growth Capital in 14 new funds
4
SUMMARY OF ICO’s ACTIVITY IN 2012 -2013
Massive injections of liquidity under conditional and structured credit schemes, 70% of the credit was addressed to SMEs and Enterprises. This credit injection is helping to overcome the crisis.
Million EUR
New Credit /Refinancing /Venture Capital 2012 2013 Total
SMEs on-lending facilities 11.511 13.885 25.396
Corporate Direct Lending 1.477 1.103 2.580
Funded from ICO's balance sheet Venture and Growth Capital 27 200 227
Other Direct 2.825 27.561 0 15.638 2.825 43.199
Direct Lending to Regional Admin. 5.334 0 5.334
FFPP - Phase I y II 6.387 450 6.837
FFPP - Phase I, II & III.a (& III.b Feb14) 20.800 14.061 34.861
FLA - Tranche III (Suppliers) 6.753 6.891 13.644
Funded by third parties FLA -Tranche I & II 9.903 37.556 15.930 37.662 25.833 75.218
State's Funds (FIEM, FONPRODE, CARI) 100 300 400
Private Venture & Growth Capital 0 480 480
Grand Total Mobilized Funds
(99% in the form of Credit)
65.117
53.300
118.417
Out of which, new credit “addressed” to SMEs & Enterprises
45.451
35.287
80.738
5
Town Councils and Autonomies
ASSETS €81 bn
10y Loans to Regional &Local
Admin.
Directly or through Fronting Banks
SMEs SUPPLIERS and LENDERS
REGIONAL & LOCAL
ADMINISTRATIONS:
• Upload online the
invoices or details of
financial obligations
• Propose Adjustment
Plan
The Ministry of Finance:
• Centralizes the uploads of invoices & financial
obligations
• Validates Adjustment Plans
LIABILIT. €81 bn
Bank Syndicated Facilities
& Treasury
ICO as Agent
Signing of
Syndicated Loan
€
ICO paid directly 8 million invoices to SMEs and
Enterprises, and the financial obligations to the
lenders (directly or, in certain cases, through some
private fronting banks)
The Ministry of Finance sends data base
of invoices & financial obligations to ICO
1
2
3
5 6
7
Signing of Loans
4
€ €
Pledge of the
Transfers from State
(in case of default)
Transfers from
State
(in case of
default)
FFPP + FLA
& several
BANKS’ SYNDICATES:
EXAMPLE OF ICO AS STATE’S AGENT BANK: FFPP & FLA (as of Feb 2014) Structuring and Implementing massive injections of liquidity in the form of new credit (70% addressed to SMEs & Ent.)
€
Sovereign
Guarantee
on
Liabilities
The Suppliers:
Voluntarily
validate and
accept online the
invoices
The Lenders
don’t need to do
anything
6
• Following the problems of the Spanish “Cajas” in 2012 and the subsequent downgrade of Spain´s Sovereign Rating, the credit in Spain and also ICO on-lending facilities went down sharply.
• In April 2013 we simplified the on-lending lines and flexibilized the intermediation margins in order to make them more bankable, allowing the banks to cover the higher consumption of regulatory capital of the loans granted to SMEs. Since then we have seen a strong recovery in the production of the on-lending credit.
• Since September 2013, ICO´s on-Lending production is beating all-time records for each period. Last quarter 2013 and first quarter 2014 have beaten all-time records for a that quarters.
• The 1Q 2014 record has not only been achieved thanks to the “new” lines, but it has also been achieved in the “old” lines (the record has been achieved in absolute terms and also homogenizing the historical series, that is, deducting the discontinued lines and the new lines).
ON-LENDING FACILITIES: SUMMARY 2013 & 1Q-2014
7
THERE IS AN INFLEXION POINT IN 2013 IN THE NEW CREDIT TO SMEs IN SPAIN… (PARTIALLY THANKS TO ICO ON-LENDING FACILITIES)
• Credit to SMEs went from +€30 bn per month, its peak in 2007, to €10 bn per month at the beginning of 2013.
• Currently new credit to SME is €12 bn / month, out of which €2bn is from ICO
Source: BdE
5000
10000
15000
20000
25000
30000
35000
40000
Mar
-04
Sep
-04
Mar
-05
Sep
-05
Mar
-06
Sep
-06
Mar
-07
Sep
-07
Mar
-08
Sep
-08
Mar
-09
Sep
-09
Mar
-10
Sep
-10
Mar
-11
Sep
-11
Mar
-12
Sep
-12
Mar
-13
Sep
-13
Mar
-14
<1M
<1M_SA
New Loans <1M (Mill. EUR): Mar ‘03 – Mar‘14
-40%
-30%
-20%
-10%
0%
10%
20%
-80
-60
-40
-20
0
20
40
60
80
20
04
Q1
20
04
Q3
20
05
Q1
20
05
Q3
20
06
Q1
20
06
Q3
20
07
Q1
20
07
Q3
20
08
Q1
20
08
Q3
20
09
Q1
20
09
Q3
20
10
Q1
20
10
Q3
20
11
Q1
20
11
Q3
20
12
Q1
20
12
Q3
20
13
Q1
20
13
Q3
20
14
Q1
SMEs: New Loans (%y/y) vs Loan
Demand
SMELoanDemand_Last3m (lhs)
SMELoanDeman_Next3m (lhs)
New SME Loans(%yoy) (rhs)
Source: BdE Fuente: BdE
8
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2008 2009 2010 2011 2012 2013 2014
7.410 YTD
9,536
15,155
19,619
16,043
11,511
13,884
16.000 TARGET
20.000 FORECAST
€ M
illio
ns
2008-2014 PRODUCTION of ICO ON-LENDING CREDIT
9
1,000
2,000
3,000
4,000
5,000
6,000
F1 F2 F3 F4 F1 F2 F3 F4 F1 F2 F3 F4 F1 F2 F3 F4 F1
Mill
ion
s
EVOLUTION OF ICO ON-LENDING FACILITIES TOTAL PRODUCTION PER QUARTER - IN MILLION EUROS
Total On-Lending Production per Quarter
The production of new credit to SMEs during 4Q-2013 was an all-time record for a 4Q. The production of new credit to SMEs 1Q-2014 was also an all-time record for a 1Q.
2010 2011 2012 2013
AA AA- A BBB BBB- BBB
2014
4Q-2013: All time record 1Q-2014: All time record
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Spanish Sovereign Rating Evolution
10
BREAKDOWM OF ICO ON-LENDING CREDIT BY SIZE OF THE LOANS – 2013
Credit Tranches Loan Amount % s/ Total Operations % s/ Total Average Loans (€)
Below 25.000,00 € 1.314,91 9,47% 97.933 51,50% 13.427
From 25.000,01 € to 75.000,00 € 2.500,66 18,01% 57.003 29,98% 43.869
From 75.000,01 € to150.000,00 € 2.145,14 15,45% 19.723 10,37% 108.763
From 150.000,01 € to 1.000.000,00 € 4.944,41 35,61% 14.430 7,59% 342.648
From 1.000.000,01 € to 10.000.000,00 € 2.979,17 21,46% 1.079 0,57% 2.761.049
Total Tranches 13.884,30 100,00% 190.168 100,00% 73.011
• More than 190,000 credits granted in 2013
• Most of the operations (51%) were micro-credits, below €25.000
• Average amount per credit were €73,011
11
BREAK-DOWN OF ICO ON-LENDING CREDIT BY COMPANY SIZE IN 2013
ALL FINANCIAL INSTITUTIONS
OPERATIONS % LOAN AMOUNT %
<9 employees 130.357 69% 5.195,56 37%
10 to 49 employees 43.124 23% 4.131,37 30%
50 to 249 employees 13.703 7% 3.003,52 22%
>250 employees 2.984 2% 1.553,85 11%
TOTAL COMPANY SIZE 190.168 100% 13.884,30 100%
• More than two thirds of the operations (69%) were granted to Micro-SMEs
(defined as < 9 employees)
12
THE VENTURE CAPITAL & PE INDUSTRY IN SPAIN
13
1986-1999 Birth of the sector in Spain
First specific legislation governing the sector (Law 1986)
Second sector Law (Law 1/1999)
2000-2008 Expansion
New legal framework approved at the end of 2005 (Law 25/2005), viewed as favorable by the sector
This law gives most of the regulatory competences in terms of access to the industry and supervision to the Spanish Securities & Exchange Commission (CNMV)
2009-2013 Economic recession: end of sector expansion
The number of active venture capital companies is around 200 and annual investment stabilized above €2,000 million in around 500 operations
2014 The commencement of a new growth phase?
Transposition of the European Directive AIFMD & New Venture Capital Law
Fund-ICO Global
EAF-Isabel La Católica
28 YEARS & 4 PHASES OF VENTURE CAPITAL & PE IN SPAIN
14
0
5.000
10.000
15.000
20.000
25.000
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Mill
ones (
€)
Capitales totales en gestión Nuevos recursos captados
Nacimiento y
arranque del
sector
Expansión y
consolidación
Estabilización
de la actividad
SECTOR START
SPREAD & CONSOLIDATION
ACTIVITY STABILIZATION
MM
(€)
• At the beginning of 2014, the sector has a total managed funds of around €25,000 million.
EVOLUTION OF ASSETS MANAGED BY VENTURE CAPITAL & PE IN SPAIN
Total Capital Managed New Funds Raised
Source: ASCRI (Spanish VC & PE Industry Association)
15
201
5225
186
102
0
50
100
150
200
250
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Núm
ero
Nacionales Internacionales Total
• Currently there are 201 active players in the sector (VC & PE management companies), out of which 80 are international.
Nu
mb
er
Domestic International Total
EVOLUTION OF THE NUMBER OF VENTURE CAPITAL & PE MANAGEMENT COMPANIES IN SPAIN
Source: ASCRI (Spanish VC & PE Industry Association)
16 16
0
1.000
2.000
3.000
4.000
5.000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Volu
men (
M€)
Inversión Nacional Inversión internacional Nº operaciones
NATIONAL VS INTERNATIONAL INVESTMENT IN VENTURE CAPITAL IN SPAIN
Vo
lum
e (M
€)
• Of the total Venture Capital investment in 2013 (€2,548 million) in Spain, international investors contributed 70%.
• Out of the 21 entities that closed their first VC & PE transaction in Spain, 20 were international funds (Argos Soditic, Avalon Ventures, Boehringer, Bruckman Rosser Sherill and Co, Correlation VC, Costanoa, Data Collective, GGM Venture Capital, GGV Capital, Greylock Partners, Horizon Ventures, Javelin, Kurma, Oxford Capital, Partners Group, QED Investors, Springwater, Top Tier Capital, Triton Partners and Warburg Pincus).
Domestic Investment International Investment Nr. Operations
Source: ASCRI (Spanish VC & PE Industry Association)
17
2012
Mn€ Ops
2013
Mn€ Ops
Incr.
2013/2012
Seed / Start up
Replacement
Growth
LBO
Other
110 193
342 8
771 363
1,302 15
22 3
83 188
662 3
786 335
794 12
30 5
- 25%
+ 93%
+ 2%
- 39%
+ 38%
Total investment 2,500 2,300 - 7.5%
Number of investments 582 543 - 6.7%
Total Fundraising (Private, Public & Int.)
Private & Domestic
2,000
375
2,200
447
+ 6.9%
Divestments 1,300 1,500 + 23%
VENTURE CAPITAL SECTOR IN SPAIN: EVOLUTION OF THE MAIN VARIABLES
Source: ASCRI (Spanish VC & PE Industry Association)
18 18
• Roughly 5% are Seed/Start-up investments (by volume)
• However, 96% of the transactions were directed to SMEs.
VC/PE INVESTMENTS BY SEGMENTS
-
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013
Nu
mb
er
Seed + Start up Expansion Replacement LBO Other
-
1.000
2.000
3.000
4.000
5.000
2007 2008 2009 2010 2011 2012 2013
M€
Seed + Start up Expansion Replacement LBO Other
Number of transactions
Volume
Source: ASCRI (Spanish VC & PE Industry Association)
19 19
• 6 deals in 5 companies transactions surpassed 100M€ (compared to 7 in 2012). All big deals were closed by international funds.
• Middle market segment (10-100M€) continued falling: only 17 deals, mostly closed by domestic investors in growth transactions.
• 90% of the closed deals entailed less than 5M€ of investment.
VC/PE INVESTMENT BY SIZE OF DEAL
-
1.000
2.000
3.000
2009 2010 2011 2012 2013 est.
M€
0 - 5 (€M) 5-10 (€M) 10- 100 (€M) 100 + (€M)
589
478525 521
495
39 32 41 28 191 7 5 7
2426253118 5
0
100
200
300
400
500
600
700
2009 2010 2011 2012 2013
Nu
mb
er
0 - 5 (€M) 5 -10 (€M) 10- 100 (€M) 100 + (€M)
Number of Deals
Volume
Source: ASCRI (Spanish VC & PE Industry Association)
20 20
Most of the volume was invested in the following sectors: Industrial services and products (32%), as Befesa or Probos Plásticos, Financial Services (25%) as Santander Asset Management, IT (9%), as Softonic or Ibermática, Medicine/Healthcare (8,5%), as Teknon or Croasa.
INVESTMENT BY SECTOR BY VOLUME
Other Services
7,1%
Consumer-related Products
7,6%
Health related
8,5%
Computer related
8,9%
Financial Services
25,4%
Industrial Products &
Services;
31,6%
By Volume
Source: ASCRI (Spanish VC & PE Industry Association)
21 21
VC/PE INVESTMENT BY SECTOR AND NUMBER OF DEALS
10%
9%
7%
6%
6%
4%
38%Computer related
Industrial Products & Services
Biotechnology
Other Services
Consumer-related Products
Health related
Ocio/Leisure
Number of transactions
However, in terms of number of deals the IT and computer related segment was the most important segment.
Overall, appetite for innovative and easily exportable goods, like IT, Health, Medicine and Biotechnology, continued quite strong.
Source: ASCRI (Spanish VC & PE Industry Association)
22
V.C. FIRM COMPANY SECTOR TYPE OF
OPERATION
ADARA/ NEOTEC/ KLEINER /TRIDENT / SIGMA/ GGV CAPITAL/ CORRELATION VC/ TOP TIER CAPITAL / INTEL CAPITAL
ALIEN VAULT INFORMATION
SECURITY START-UP
YSIOS CAPITAL/ CAIXA CAPITAL RISC/KURMA LIFE SCIENCES/ IDINVEST PARTNERS/ BOEHRINGER INGELHEIM VENTURE FUND
STAT DIAGNOSTICA
DIAGNOSTIC SYSTEMS
START-UP
AXIS /CCMP VOLOTEA LOW-COST FLIGHTS START-UP
SEAYA VENTURES PLENUMMEDIA TECHNOLOGICAL
SOLUTIONS GROWTH
COSTANOA/JAVELIN VP 3SCALE NETWORKS MANAGEMENT
SOFTWARE START-UP
BBVA VENTURES FREEMONEE FINANCIAL SERVICES GROWTH
TELEFÓNICA VENTURES BOX CLOUD COMPUTING GROWTH
YSIOS CAPITAL CVRX MEDICAL DEVICES START-UP
AVALON VENTURES / DATA COLLECTIVE
TEAMBOX
SOFTWARE GROWTH
SEAYA VENTURES RÉSTALO RESTAURANT
RESERVATIONS START-UP
MAIN VENTURE CAPITAL INVESTMENTS IN SPAIN IN 2013
+ AXIS
Source: ASCRI (Spanish VC & PE Industry Association)
23
MAIN VENTURE CAPITAL DIVESTMENTS IN SPAIN IN 2013
VENTURE CAPITAL Company Exit Mechanism
IINVEREADY/INTEL CAPITAL Indysis Sale to Industrial Investor
YSIOS CAPITAL Endosense Sale to Industrial Investor
ACTIVE VENTURE PARTNERS Telemedicine Clinic Sale to Financial Investor
INTERCOM Niumba Sale to Industrial Investor
UNINVEST / INVERCARIA Biomaslinic Sale to Industrial Investor
UNINVEST Visionmetrics Sale to Industrial Investor
INVEREADY / CAIXAPE Lucierna Sale to Industrial Investor
KIBO VENTURES LLink Booking Sale to Industrial Investor
Source: ASCRI (Spanish VC & PE Industry Association)
24 24
Big Deals (+100M€)
Middle market (10-100M€)
P.E FIRM COMPANY SECTOR TYPE OF
OPERATION
TRITON PARTNERS BEFESA INDUSTRIAL WASTE
MANAGEMENT BUYOUT
GEN_ATLANTIC/ WARBURGPINCUS
SANTANDER ASSET MANAGEMENT
FINANCIAL SERVICES REPLACEMENT
DOUGHTY HANSON TEKNON HOSPITALS BUYOUT
BRIDGEPOINT DORNA SPORTS SPORTS BUYOUT
PARTNERS GROUP SOFTONIC SOFTWARE REPLACEMENT
MAGNUM IBERCHEM AROMAS AND FRAGRANCES
BUYOUT
N+1 MERCAPITAL PROBOS -PLÁSTICOS PLASTICS BUYOUT
N+1 MERCAPITAL SALTO SYSTEMS ELECTRONIC LOCKS BUYOUT
COFIDES GESTAMP AUTOMOTIVE GROWTH
BRS GAMO SPORTING WEAPONS BUYOUT
PROA CAPITAL IBERMÁTICA IT CONSULTING BUYOUT
TORREAL ASTON MARTIN AUTOMOTIVE GROWTH
NAZCA CAPITAL AGROMILLORA CATALANA
FOOD GROWTH
NAZCA CAPITAL FRITTA CERAMICS BUYOUT
ARTÁ CAPITAL EN CAMPUS UNIVERSITY RESIDENCES
GROWTH
MAIN PRIVATE EQUITY INVESTMENTS IN SPAIN IN 2013
Source: ASCRI (Spanish VC & PE Industry Association)
25
MAIN PRIVATE EQUITY DIVESTMENTS IN SPAIN IN 2013
PRIVATE EQUITY Company Exit Mechanism
DOUGHTY HANSON Avanza Grupo Sale to Industrial Investor
VISTA y PORTOBELLO Indas Sale to Industrial Investor
CVC CAPITAL PARTNERS Revlon (The Colomer Group) Sale to Industrial Investor
N+1 MERCAPITAL y CARLYLE Arsys Sale to Industrial Investor
MCH PRIVATE EQUITY Televida & Hogar Sale to Industrial Investor
GED IBERIAN PRIVATE EQUITY Grupo Sendal Sale to Industrial Investor
SUMA CAPITAL CTC Externalización Sale to Industrial Investor
TALDE GESTIÓN Noa Visual Group Sale to Financial Investor
SUMA CAPITAL GEC Sale to Industrial Investor
MIURA PRIVATE EQUITY Noa Visual Group Sale to Financial Investor
MAGNUM Teknon Sale to Other VC Firm
ARNELA CAQPITAL Vetra Energía Sale to Other VC Firm
MCH PRIVATE EQUITY Gamo Sale to Other VC Firm
CAPITAL ALIANZA Iberchem Sale to Other VC Firm
ESPIGA CAPITAL Grupo Softonic Sale to Other VC Firm
Source: ASCRI (Spanish VC & PE Industry Association)
26
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
27
7%
4%
5%
4%
12,7%
11,9%
10,6%
13,1%
0% 2% 4% 6% 8% 10% 12% 14%
Total Assets
Gross margin
Revenues
Employement
Without VC/PE With VC/PE
On average, companies with VC & PE support grow more than their comparable non-investee companies Methodological Note: The chart shows the average annual growth of the main figures of the investee companies by the venture capital & private equity after three years from the investment, and compare it to the average annual growth experienced in the same period by a group of control (consisting in similar companies in which venture capital & private equity is not involved):
Source: Economic & Social Impact of Private Equity & Venture Capital in Spain 2011, edited by ASCRI Data obtained comparing 1.420 companies invested by VC&PE in 1996-2005 to a “control group” of 1.158 companies not financed by the sector. Both groups are similar in terms of geographical distribution, sector and size of the companies.
Impact of the VC & PE in the Spanish investee companies
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
Source: ASCRI (Spanish VC & PE Industry Association)
28 28
MAIN CONCLUSIONS OF IMPACT STUDIES
Companies backed by Venture Capital fuel better the economy:
Companies experience higher growths. They create employment at a higher rate than other companies. They accomplish large scale investments in plants and equipment's. They develop further internationally Their exports grow at a faster rate
Venture Capital investors are active partners that contribute with financial and non-
financial support:
They provide capital, enabling the company to grow rapidly They provide support to company’s management with their expertise and
know-how. This double contribution is highly valued by companies
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
Source: ASCRI (Spanish VC & PE Industry Association)
29
VC & PE activity in Spain vs GDP
VC & PE Spanish investment respect to GDP has fallen during the last years, but remains well below the leading countries (new investments 0.26% GDP)
0,00%
0,05%
0,10%
0,15%
0,20%
0,25%
0,30%
0,35%
0,40%
0,45%
0,50%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Investment/GDP (%)
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
Source: ASCRI (Spanish VC & PE Industry Association)
30
Source: Articstartup.com, Microsoft and ESADE, 2012
Finland Sweden Israel USA EU Spain
$142
$80
$46 $45
$7 $4
2010 per capita figures by Country invested by VC in early stage projects
The average in Europe, and in Spain in particular, in annual investments realized in early stage projects by VC funds (public & private) is well behind the most innovative countries
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
31
USA France UK Sweden Israel Spain
$847
$765
$590
$130
$90 $19
2013 Public & Private VC & PE Fundrasing per capita by Country
VC/PE Fundraising in Spain is also well below the leading countries
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
Source: ASCRI (Spanish VC & PE Industry Association)
32
Capital Raised by Private Equity Funds in Spain
The private equity industry plays a key role in creating, financing and professionalizing businesses, but in Spain needs a revitalization.
Source: ASCRI
€450 million
• 450 M€ of funds raised by domestic private VC & PE entities, higher than in 2012 but still very far from 2005-2008 levels.
• Most of the domestic private fundraising was devoted to Venture Capital (Seaya Ventures, Adara Ventures II, Axon Amerigo Ventures or Suma Venture Opportunities).
• Only 1 private Growth Capital fund was closed in 2013 (Mediterranea Capital II)
<€10 per capita
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
33
New Credit Issuance to Businesses (*)
Deleveraging and Contraction of the Spanish Financial System
The banks deleveraging and concentration process resulted in a deterioration of credit to SMEs. Thus, revitalization of venture capital and private equity are key for SMEs.
Source: Banco de España – (*) 4 month moving averages
Source: Banco de España
Billio
n e
uro
s
1,498 1,760 1,870 1,837 1,844 1,783 1,538 1,419
43,788 45,596 46,167 44,534 43,267 40,202 38,237
35,521
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
dec -06 dec - 07 dec -08 dec -09 dec -10 dec -11 dec -12 dec -13
Loan Portfolio Number of branches
Billio
n e
uro
s
0
10
20
30
40
50
60
70
Loans < €1m Loans > €1m
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
34 34
• Summary:
€25,000 million managed in Spain
201 active companies
€2,500 million of annual investment
Below €500 million of annual domestic fund-raising
• Challenge 1: Achieve higher levels of investment from private and institutional investors, by promoting fund-raising.
• Challenge 2: Consolidate Spain's attraction for international Venture Capital funds.
• Challenge 3: Increase Venture Capital investments in order to continue backing SMEs growth and competitiveness.
WHY PROMOTING VENTURE CAPITAL IN SPAIN?
35
ICO INITIATIVES TO PROMOTE VENTURE CAPITAL IN SPAIN
36
AXIS is a an investment institution, wholly owned by Instituto de Crédito Oficial (“ICO”), aimed at providing investment financing to Spanish companies through equity and hybrid instruments. Founded in 1986, Axis has invested in over €300 million in approximately 140 companies. Axis currently manages the following funds: • Fond-ICO Global: a €1.2 billion Fund of Funds program created to revitalize
the private equity industry in Spain • Fond-ICO Pyme: €250 million focused on investing in growing mid-market
companies with solid expansion plans • Fond-ICO Infraestructuras: €250 million focused on investing in
infrastructure projects including transportation, energy and infrastructure services
AXIS AS ICO’S VENTURE CAPITAL & PE ARM
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ICO INITIATIVES FOR PROMOTING VENTURE IN SPAIN Mission: Support Spanish Innovation & Entrepreneurship and SMEs’ growth, through Indirect Venture Capital, catalyzing the creation of as many Private Risk Capital Funds as possible, in the most important segments (Early Stage, Venture Capital & Growth Capital)
RIS
K
- PROXIMITY TO THE MARKET +
FUNDS OF VENTURE CAPITAL FUNDS OF
GROWTH CAPITAL
PRIVATE EQUITY
R & D
BASIC RESEARCH
INNOVATION
€30m x 2
€200m x 2
€400m x 3
€200m x 5 Other Growth
LENDING FUNDS
€300m x 4
FUNDS OF
INCUBATION
Fund of Funds €1.200 million
Figures of funds allocation are just examples, and do not represent any commitment
Multipliers are the targeted proportion of private/public money BUSINESS
ANGELS Isabel La Católica
ENTREPRENEURSHIP
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EUROPEAN ANGELS FUND - EAF ISABEL LA CATÓLICA
Fund created in 2013 by ICO & CDTI and The European Investment Fund (EIF) for co-investing automatically with business angels in equity instruments in early stage Start-Ups.
39
FOND-ICO GLOBAL INITIATIVE: GENERAL DESCRIPTION
Fond-ICO Global (the “Fund”) is seeking to invest across the entire investment life cycle which includes seed capital, venture capital, growth capital, buyouts, turnarounds / distressed, among others: • The program amounts up to €1.2bn with an investment period of 4 years. The
investment pace will depend on investors appetite and the available market opportunities at each moment.
• The Fund will invest in projects that combine innovation and entrepreneurship via investments in companies in both the initial and more advanced stages of development. Indirectly, the Fund seeks to promote employment creation, attract international investors and enhance the internationalization of Spanish companies, amongst other benefits.
• In addition, the investment strategy will focus on those funds with a significant percentage of investments in Spain.
The investment program will be implemented through recurrent public tender processes, accessible for all those funds that meet the qualification requirements (which will be defined and communicated in each tender). During the selection phase, the vehicles in which the Fund will invest will be selected based on the score that each candidate obtains according to the transparent criteria and formula defined in each of the tender’s specifications.
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Fond-ICO Global represents a public-private initiative aimed at enhancing the capitalization of Spanish SMEs through private funds managed by private managers.
Fond-ICO Global pursues to act as a catalyzer for the creation of as many as possible
venture capital and private equity funds, focused in Spanish entrepreneurship and SMEs. It grants anchor investments to private funds of new creation through public tendering processes in order to mobilize as much private money as possible into the Spanish risk capital arena.
In its first public tendering process in December 2013, Fond-ICO Global granted
anchor investments for a total amount of €190 million to 3 venture capital funds and 3 growth capital funds, mobilizing near €700 million of private investment, more than the whole Spanish risk capital sector in 2013. The target is to launch at least 3 similar tendering processes each year. This year 2014, the first tender process has been launched in February, the second will be in July, and the third will be in November.
The initiative is helping to promote the international appetite for investing in VE / PE in Spain: In the last tender launched in February 2014, the international appetite for the initiative has been significant, with 11 international candidates, (out of which 24 that presented offers), willing to create specific VE / PE funds in Spain.
FOND-ICO GLOBAL INITIATIVE: GENERAL DESCRIPTION
41
1. THROUGH PUBLIC & PRIVATE PARTNETRSHIPS 2. SIMPLE: UNDER SIMPLE SCHEMES 3. FLEXIBLE / ADAPTABLE 4. TRANSPARENT 5. CONCURRENT / COMPETITIVE 6. OBJECTIVE 7. EXIGENT 8. RECURRENT / DEFINED DATES AND SCHEDULE 9. ALL SCORES AND VALUATION ALGORITHM ARE
SUMMARISED TRANSPARENTLY IN AN EXCEL
FOND-ICO GLOBAL: CATALISER / PROMOTER OF THE PRIVATE VC INDUSTRY
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FOND-ICO GLOBAL FRAMEWORK
MINIMUM
REQUIREMENTS
Management company authorized or registered under the corresponding local regulatory body in an OECD member.
Mainly private funds and management company must be 100% privately owned.
At least 5 years of experience of the management investment team.
Minimum of 20% of the total fund in hard commitments, conditioned to FIG award.
Management fee: <2.5% venture capital; <2.0% growth capital.
Management team investment in the fund: at least 1.0%
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FOND-ICO GLOBAL FRAMEWORK
EVALUATION &
SELECTION
CRITERIA
30 different
scores,
rated 1, 2, 3 or 4,
and classified and
weighted as
follows:
Qualitative Criteria Weight: 10%
• Investment strategy 13.5%
• Investment team 13.5%
• Track record (IRR, multiples) 18.0%
• Investor base (International?) 22.5%
• Economics proposed 18.0%
• Other (Local teams in Spain) 4.5%
• Team Size & Experience 2.5%
• Decision-making process 2.5%
• Reporting and monitoring 2.0%
• Valuation methodology 2.0%
• Governance policies 1.0%
Quantitative Criteria Weight: 90%
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FOND-ICO GLOBAL FRAMEWORK
FOND-ICO
GLOBAL
COMMITMENTS
Conditionality: Final Axis commitments with the funds are subject to the fulfillment of certain conditions (Note: Terms and conditions may change in future tenders).
Maximum commitments by Axis:
• Incubators Funds: Up to 49% of the fund or € 5 mill. (Definition of Incubators: funds that invest mainly in equity in the range of €20,000 to €1 million in newly incorporated companies).
• Venture Capital Funds: Up to 40% of the fund or € 20 mill. (Definition of venture capital: funds that invest mainly in equity in the range of €250,000 to €10 million in private companies incorporated no more than five years prior to FIG investment).
• Growth Capital Funds: Up to 30% of the fund or € 70 mill. (Definition of growth capital: funds that invest equity, profit-sharing loans or mezzanine in the range of €2 to €100 million in private companies incorporated at least three years prior to FIG).
Investment in Spain: The awarded funds should invest in Spain at least 2.0x the amount committed by Axis Re-purchase Option: LPs in the awarded funds have the option to acquire Axis’ participation in the fund through an auction process at a MINIMUM PURCHASE PRICE = Invested by Axis Capital with Minimum IRR of 8%)
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FOND-ICO GLOBAL: 2013 INVESTMENT PLAN
FIRST TENDER
Opened
Oct. 2013
Awarded
Dec. 2013
21 Candidates (3 of them international funds) 6 Tickets awarded (3 Venture and 3 Growth) Total amount committed by Fond-ICO: €189M (16%) Funds mobilized in the tender: €685M
STRATEGY SELECTED GPs
FUNDS’
TARGET
SIZE
Fond-ICO
Global
COMMITS
Venture €160 M €39 M
Growth €525 M €150 M
TOTAL € 685 M €189 M
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FOND-ICO GLOBAL: FIRST TENDER’S AWARDS
Generalist Fund. Growth capital in the middle market (ie, Claims management outsourcing for insurance companies; White label ice cream producer; Hospital catering services).
GROWTH
VENTURE
Investments in early stages in Internet.
Energy efficiency. Investments in early stages of renewable energy and energy efficiency projects. Social entrepreneurs. Social contribution & intensive in employment creation (ie, traditional and local agriculture; neurological pediatric health centers, etc.)
Generalist Fund. Growth Capital and Buyouts in the up-middle market. Majority stakes (ie., Logistic, automobile components, tour-operators, pet care retailers). Generalist Fund. Growth Capital in the low middle market (ie., Apparel Retailers; Technological lighting; Energy Management; Energy Equipment)
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FOND-ICO GLOBAL: 2014 INVESTMENT PLAN
SECOND TENDER Opened
21 Feb 2014
To be Awarded End of May 2014
THIRD TENDER To be opened 11 July 2014
To be awarded
Oct. 14
• 8 Tickets: 4 Venture and 4 Growth • 11 international funds, out of 24 Applications • Bigger funds (some of several bn) • Total amount committed Fond-ICO: €248 Mill • Funds mobilized in the tender: €3,785 Mill • Conditions to be announced • 9 tickets (2 Incubators, 2 Venture, 3 Growth, 2 Lending)
• Conditions to be announced
FOURTH TENDER To be opened 28 Nov. 2014
To be awarded
(Tba)
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• Greenfield infra projects developed by an SPV
• Fund can only materialize investment after bidding stage.
• During Bidding Stage → non-exclusive Support Letters Investment focus
• Transport: roads, highways/motorways, rail infra, intermodal infra
• Energy: generation, distribution infra
• Social Infrastructure: health, education, justice… Target sectors
• Equity, Quasi-equity, participative loans.
• Minority stake: 10% - 49% on Own Resources.
Financial tool
• Investment Period: until 2015.
• Fund life: maximum 20 years.
Term
• 10 - 30 € Million.
Investment size
• Minimum IRR for equity stakes on a two-digits’ range. Target Return
FOND-ICO INFRAESTRUCTURAS: SPECIAL FOCUS IN ‘SPANISH’ INTERNATIONAL INFRASTRACTURES
