Analysis of Spain’s private equity market

December 2025  |  SPECIAL REPORT: PRIVATE EQUITY

Financier Worldwide Magazine

December 2025 Issue

The private equity (PE) industry has long been recognised for its ability to adapt to changing market conditions and to drive value creation across a wide range of sectors. Over the past 12 months, the industry has faced a complex and evolving landscape, shaped by macroeconomic headwinds and shifting investor expectations.

In Spain, PE dealmaking has been resilient and increasingly value‑led over the past year, with a clear rebound in disclosed values despite flat volumes and a marked pivot toward larger, sector‑focused transactions.

This article provides a comprehensive overview of the PE market’s performance, with a particular focus on Spain, while also reflecting on developments in other key European jurisdictions. The analysis considers the impact of current macroeconomic conditions, market trends and the momentum of M&A activity, offering insights into the challenges and opportunities that have defined the industry over the past year.

Macroeconomic backdrop: navigating a challenging environment

The global economic environment over the past year has been characterised by heightened geopolitical uncertainty. The ongoing conflicts in Ukraine and Gaza, coupled with tariffs in the US, supply chain disruptions and persistent (though declining) high inflation and interest rates, have contributed to a cautious investment climate across Europe.

While central banks have responded to decreasing inflationary pressures by lowering interest rates, and despite borrowing costs having reduced, a more selective approach to dealmaking is being sought by PE players.

In Spain, these macroeconomic challenges have been felt acutely. The Spanish economy, while demonstrating resilience, has not been immune to the broader European slowdown and geopolitical context. Nevertheless, the Spanish PE market has shown remarkable adaptability, with fund managers focusing on operational improvements, value creation within portfolios and strategic add-on acquisitions to navigate the uncertainty.

Deal activity: a measured slowdown and sectoral shifts

Following the record-breaking deal volumes of 2021 and early 2022, PE dealmaking has recovered from 2023’s lows, but activity remains selective and shaped by higher financing costs, elongated hold periods and constrained exit channels.

In Spain, the number of PE-backed deals declined by approximately 20 percent compared to the previous year, reflecting a broader trend observed in major European markets such as the UK, France and Germany. The slowdown in deal activity can be attributed to several interrelated factors.

First, sellers’ price expectations, often anchored in the exuberance of previous years, have not always aligned with buyers’ more conservative outlooks. This has resulted in protracted negotiations, a rise in deal renegotiations and, in some cases, failed processes.

Second, the still high interest rates have made leveraged buyouts more challenging, prompting a shift toward deals with lower leverage or alternative financing structures. Lenders have become more cautious and debt terms are still tight, leading to a greater reliance on equity financing and creative deal structuring.

Third, heightened regulatory oversight, particularly in sectors such as technology, healthcare and infrastructure, has added complexity to cross-border transactions. In Spain, increased scrutiny of foreign direct investment has also influenced deal timelines and structures.

Despite these challenges, the Spanish market has remained active in certain segments, notably in mid-market deals and sectors with strong fundamentals. Healthcare, education and technology have continued to attract significant interest from both domestic and international investors. The resilience of these sectors has helped to offset the slowdown in more cyclical industries, such as consumer and retail.

Sector trends: spotlight on resilience, innovation and growth

The past year has underscored the importance of sector selection and operational value creation. In Spain and Europe-wide, certain sectors have outperformed, attracting sustained interest from PE investors.

The pandemic has accelerated investment in healthcare infrastructure, digital health and biotech. Spanish PE firms have played a key role in consolidating clinics, laboratories and specialised care providers, while also supporting innovation in medical technology and pharmaceuticals.

Digitalisation remains a key theme, with investments in software, fintech and e-commerce platforms. PE funds are increasingly targeting companies that enable digital transformation across industries, recognising the long-term growth potential of technology-driven business models.

While consumer-facing sectors have faced headwinds due to inflation and changing spending patterns, niche segments such as premium brands, health-oriented products and experiential retail have shown resilience. PE investors are selectively targeting opportunities in these areas, focusing on companies with strong brand equity and growth potential.

Education has also been a very active sector for PE investments, where players are focusing on private universities, digitalised learning models, vocational education and training, and scalable business to business training platforms. Assets with measurable learning outcomes, robust student support and diversified revenue across online, hybrid and on-campus delivery are top of the list for many firms.

Exit environment: fewer, more strategic exits and continuation funds

The exit market has become more constrained over the last 12 months, with fewer initial public offerings (IPOs) and a slowdown in secondary buyouts. Trade sales remain the most common exit route, particularly to strategic buyers seeking to expand their footprint or capabilities.

Exits have been concentrated in sectors with strong underlying demand, such as infrastructure and technology. The timing of exits has become more strategic, with sponsors willing to hold assets longer to maximise value creation and await more favourable market conditions.

In Spain specifically, the exit pipeline has been constrained by a persistent valuation gap between sellers and buyers, higher financing costs and a narrow IPO window. These dynamics have made pre-agreed processes with strategic buyers and club deals more prevalent, while pure sponsor to sponsor sales have moderated. As a result, sponsors are increasingly relying on alternative liquidity solutions to manage fund durations and distribute capital.

One notable consequence has been a clear uptick in general partner (GP)‑led secondaries, particularly single‑asset and concentrated continuation vehicles for high‑conviction assets in resilient sectors such as infrastructure, healthcare and tech‑enabled business services. These vehicles are being used to reconcile the timing mismatch between fund life and value‑creation trajectories, provide optional liquidity to existing limited partners (LPs) and introduce fresh capital for follow‑on M&A.

Over the last 12 months, the Spanish continuation‑fund market has expanded from a small base, with more mid‑market managers pursuing GP‑led solutions and a growing pool of secondary investors actively targeting Iberian assets.

Fundraising and dry powder: a flight to quality and sector expertise

Fundraising conditions have become more challenging over the past year, with LPs exercising greater caution in their capital allocations. The so-called denominator effect – where declines in public markets reduce the relative weighting of private assets in institutional portfolios – has led to a more selective fundraising environment. Global uncertainty has further contributed to a cautious approach among LPs, which are increasingly focused on manager track record, sector expertise and value creation capabilities.

In Spain, several leading PE firms have successfully closed new funds, albeit with longer fundraising periods and a greater emphasis on differentiation. Across Europe, the trend is similar: LPs are consolidating relationships with top-performing GPs, while emerging managers face greater hurdles in attracting capital.

Despite the slowdown in fundraising, the industry still sits on record levels of dry powder, with estimates suggesting that European PE funds have over €300bn in uninvested capital. This capital overhang is expected to drive increased competition for high-quality assets once market conditions stabilise.

ESG considerations and impact funds: a new era of responsible investment

Regulatory developments continue to shape the PE landscape in Spain and throughout Europe. PE firms are increasingly integrating environmental, social and governance (ESG) criteria into their investment processes, not only to comply with regulatory requirements but also to meet the expectations of LPs and other stakeholders.

ESG integration is now seen as a source of value creation and risk mitigation, rather than a mere compliance exercise. Firms that can demonstrate genuine ESG impact are better positioned to attract capital, secure deals and achieve superior long-term returns. In Spain, there is a growing recognition of the importance of responsible investment, with PE firms actively engaging with portfolio companies to drive sustainability initiatives and improve governance standards.

In parallel, over the last 12 months, the Spanish market has seen a measurable uptick in both the number of impact vehicles and capital raised, driven by LP demand and the regulatory tailwind. Energy transition, circular economy, waste valorisation and social infrastructure are included within the preferred verticals for this type of fund. These trends underscore that impact is no longer solely an ESG overlay: it is a distinct capital formation channel attracting institutional commitments.

Conclusion

The past 12 months have tested the resilience and adaptability of the PE industry in Spain and across Europe. While deal activity has moderated and fundraising has become more selective, the sector remains well-capitalised and poised for future growth. As macroeconomic conditions evolve, PE will continue to play a vital role in supporting innovation, transformation and value creation across the European economy.

By focusing on operational excellence, sector expertise and responsible investment, PE firms are well-positioned to navigate the challenges ahead and seize the opportunities that will undoubtedly arise in the next phase of the market cycle. The coming year will require agility, creativity and a commitment to long-term value creation, but the foundations for continued success remain strong.

 

Francisco J. Martínez Maroto is a partner and Pedro López-Dóriga is a senior associate at Cuatrecasas. Mr Martínez Maroto can be contacted on +34 915 247 806 or by email: franciscoj.martinez@cuatrecasas.com. Mr López-Dóriga can be contacted on +34 915 247 350 or by email: pedro.lopez-doriga@cuatrecasas.com.

© Financier Worldwide

BY

Francisco J. Martínez Maroto and Pedro López-Dóriga

Cuatrecasas

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