Spanish Small & MidCaps: Alantra (Formerly N+1)


Diego Salvador (Gesconsult) | N+1 is a financial institution founded by Santiago Eguidazu in 2001, after he left AB Asesores following its purchase by Morgan Stanley. From the very beginning, it has focused on two business areas: advising on mergers and acquisitions and the management of a venture capital firm – Dinamia (formerly called AB Asesores Electra). It currently has two divisions: investment banking and asset management.

N+1 has an excellent management team with a record of successes in the venture capital world. And what appeals to us is its growth story as an M&A advisor, against a backdrop of expected record growth in this industry in 2016-2017.

Its investment banking division is present in 19 countries and employs 200 professionals. Thanks to this internationalisation, over 56% of its operations are outside Spain. It has bought stakes in small investment banks in others countries: in Chile, the UK etc. The acquisitions which they make overseas have a pay-back time of 1.5 years as they are very profitable.

N+1 has traditionally concentrated on the mid-cap market (companies with €100 a 1 billion in sales), given that it cannot compete with the big US Banks (Morgan Stanley, Goldman Sachs etc).

With regard to the asset management division, this controls 3.2 billion euros. Its assets are growing quickly thanks to the acquisition of Syz bank in Spain (Syz is a very prestigious Swiss private bank, with €45 billion of assets under management). For the first time since 2009, this division is now big enough to generate profits. Its target is to have €2 billion under management in 3 years. It also has two hedge funds (EQMC) which are considered as the best in their category (“European Event Driven”). They have a 5-year rate of return of 23% annualised. The equity is still low but our forecasts for this business are quite high.

N+1 trades at very attractive multiples compared with the market and the industry.

The barriers to entering its business are very high thanks to the fact that a long track record is necessary (over 15 years in Dinamia). Its free cash flow is extremely profitable, while it also has excess cash to enable it to continue to grow.

We like N+1’s business mix: two areas which are complementary and reduce the sistemic risk.

Risks include a possible deterioration in the economic situation, which would have a greater impact on investment banking which is highly leveraged to the cycle. And the recent performance and volatility in the stock market has a major impact on the generation of new assets under management. A volatile market and political uncertainty usually have a negative effect on the sector.

The company’s results began to improve significantly from 2015, driven by the merger of Dinamia.

N+1 is developing a very successful franchise thanks to the purchase of “boutique” investment Banks in the US, as well as in countries like Germany, Austria and Japan in the near future. The asset management division has just launched a new €450 million fund, which shows the good reputation it has in this area. We are confident that the excellent and proven management team can continue to expand their business inorganically with continued acquisitions in attractive countries like the US.