DC Advisory, a global investment bank specializing in middle-market transactions, has published its latest European Private Equity Mid-Market Monitor Q1 2026 & Outlook, analyzing the latest trends and developments in the European private equity market. The following are key insights relating to the Spanish market.
In this regard, César García, Managing Director at DC Advisory, commented:
- “For private equity funds, 2026 will be a pivotal year to accelerate portfolio rotation and realize investments made five or six years ago, at a time when operational value creation within portfolio companies has returned to the core of private equity strategy.”
- “In the Spanish market, we are seeing a much more selective investor profile. Amid geopolitical and technological uncertainty, capital is flowing toward companies that can demonstrate recurring revenue generation, operational resilience, and strong pricing power.”
Key Trends in the Spanish Market
Growing Volume of Assets Awaiting Exit
- 2026 represents a critical year for the private equity market. Many of the funds raised in Spain before the pandemic are approaching the end of their typical investment periods, with a key inflection point expected in 2028 and 2029.
- However, LPs remain reluctant to force exits, as premature sales could negatively impact asset valuations. In this context, there is increasing pressure to strengthen portfolio companies through add-on acquisitions.
- The technology sector has improved gross margins and increased revenues. Nevertheless, investors remain concerned about the impact of AI on certain subsectors, particularly software.
- The only assets for which private equity funds are willing to pay significant premiums are so-called top-tier assets, those capable of commanding high valuation multiples.
- As a result, DC Advisory is observing growing reluctance among buyers to participate in auction processes involving a large number of competing funds.
Foreign Investment and Energy as Positive Growth Drivers
- DC Advisory maintains a positive outlook for Spain, supported by expectations of increasing foreign investment and continued interest from pan-European investment firms.
- Geopolitical tensions surrounding energy supply are prompting governments to seek greater energy independence. As a result, companies operating in the energy sector are benefiting from public support measures aimed at expanding activity.
- Investors continue to favor non-cyclical businesses. Companies operating in sectors with significant international exposure are perceived as carrying higher levels of risk and volatility.
- Conversely, domestically focused assets are viewed as safer investment opportunities, particularly non-cyclical B2B businesses characterized by recurring cash flows, stable revenue generation, and strong pricing power.
Rising Interest in Refinancing Solutions to Bridge Valuation Gaps
- There is increasing interest in refinancing transactions and extensions of investment periods. Secondary transactions and alternative financing solutions have become more widely accepted market practices.
- Banks and debt funds remain active, although they are exercising greater caution than private equity investors. The availability of leverage for buyouts (LBOs) is becoming increasingly restricted, making pre-sale refinancing a much more common strategy.
- Strong value creation and cash flow generation across portfolio companies help create a more favorable environment for future exits.
Conclusion: Favorable Environment, Though Sensitive to Geopolitical Developments
- With substantial dry powder available and investors increasingly focused on specific investment themes, the market environment is conducive to a gradual increase in deal activity.
- However, transaction volumes could still be influenced by developments in the geopolitical landscape.
Pan-European Context
- European M&A activity has shown resilience, with deal volume declining by only 3% year-on-year, although the market has become more cautious and selective.
- Market uncertainty continues to weigh on activity. A 12% decline in deal volume during the first quarter of 2026, combined with post-pandemic lows in platform deals, suggests that a broader recovery in deal-making may not materialize until late 2026.
