Is Malta’s financial sector ripe for a private equity shake-up?
After more than a decade in Malta, the easy pace of business here still amazes Albert Alsina.
“You go to the bank and ask for a mortgage, and they give you an answer in five months!” he exclaims. “That doesn’t happen anywhere else. In other banks, they tell you in two or three weeks.”
But history teaches that good things come to those who wait, and Alsina – a private equity investor whose firm is now eyeing the Maltese market – is quick to acknowledge the upside.
“The loan terms are actually very good,” he says. “All the money goes into real estate. And it will continue to do so, to some extent,”
In that sort of business environment – slow, steady, safe – Alsina’s proposition could prove to be a hard sell. Why should investors in Malta lock cash up in private equity when the real estate market is so stable and liquid?
“Here, nobody has debt,” Alsina acknowledges. “They say, ‘I don’t want to owe money to the bank. So it will be a challenge to attract them, of course.”
The Catalan investor and founder of private equity firm Mediterranea Capital Partners (MCP) is confident the opportunity is ready to be unlocked, given the right incentives and policies.
A €150 million plan
Alsina and his partners registered MCP in Malta in 2013. The firm operates as an MFSA-licenced Alternative Investment Fund manager. It has spent the past decade focusing its efforts southwards, in Africa.
Now, the company is gearing up to launch a new €150 million South Europe fund by the end of 2026. Alsina says they will use the money to assume a controlling stake in 10 different Southern European companies, including Maltese ones.
“Four to five will be in Spain, two in France, two in Italy and probably a couple of them in Malta. We already have a pipeline of companies ready,” he says.
The company names remain elusive, but in the course of our 50-minute conversation at MCP’s offices at Whitehall Mansions in Ta’ Xbiex, some hints emerge.
Exits for family-run businesses
In Malta, Alsina sees private equity as an ideal exit route for family-run businesses with no succession plan.
“You have someone whose kids don’t want to take over the company. He’s got, say, five more years. We can come in, take 60%, help him take the next step, and get some cash. And then we’ll see who takes over in the next round.”
The challenge for Alsina and his team will be to convince founders used to decades of total control to sign away their corporate baby to investors focused on flipping it within a few years.
More generally, Alsina and his team believe they can leverage their experience and knowledge of North African markets to help European companies that see opportunity to grow in developing world markets.
“The next step we’re looking at is companies that are already selling into Africa. We can put some money in and help them grow faster,” he says.
Alsina makes bold promises to back up his pitch, claiming his firm has delivered average annual returns of 24.8%, with one Malta-domiciled fund reportedly gaining 50% this year. In the opaque world of private equity, such paper returns are difficult to verify independently.
Out of Africa
MCP manages over $1 billion in assets, ranging from African banks, hospitals and supermarkets to a truck assembly firm.
Some of those investments have paid off in a big way, and Alsina makes it a point to emphasise that MCP investments have led to three “unicorns”.
The term is usually reserved for privately held start-ups valued at over USD$1 billion. Alsina uses it to refer to three companies that surpassed that valuation upon listing on the Casablanca Stock Exchange: healthcare group Akdital, money transfer business Cash Plus and construction group TGCC. All three are Moroccan, and all three led to outsized returns for MCP when it exited. A Cash Plus IPO, for instance ,was oversubscribed 65 times over last December. MCP announced a partial exit the next day.
Alsina is less loquacious about the firm’s laggards. Investments in Tunisian wheat distributor Randa and Algerian car leasing firm Cieptal, for instance, have been on the company’s books for a decade. That is significantly longer than typical private equity cycles.
It’s perhaps a sign of the higher risks that come with investments in less developed markets.
“Tunisia has been tricky,” Alsina admits. “But when you invest in emerging markets, you need to understand the risks very well. And perceived risk is super high, but the real risk – when you know the markets – is lower.”
“So take currency risk. We invest in companies that export their products and get paid in dollars, or countries with lower currency risk, like those using the West African CFA franc [which tracks the euro]”
Alsina’s private equity pitch to Malta
Having planted the MCP flag in Africa, Alsina is now keen to do the same here. He firmly believes there is a private equity formula that can work across verticals, continents and companies – he’s even written a book about it and will be talking about the subject with local entrepreneur Alexander Fenech at an event later this month.
As a founding member of the Private Equity and Venture Capital Association (PEVCA), he is part of a lobbying effort to make Malta more attractive to private equity investors.
Alsina believes Malta needs two major changes to make that a reality.
The first is simple: extend some existing tax incentives to alternative investment funds. The capital gains exemption for Malta-listed stocks comes to mind.
“It doesn’t have to be anything new,” Alsina says. “We’re talking to the government, and they understand. They are very keen, very proactive on business.”
The second is a more overt lobbying pitch that would help firms like Alsina’s raise money.
Alsina would like a broader remit for the Malta Development Bank, allowing it act as an anchor investor and fund of funds.
The MDB’s equivalents in Italy and France, the CDP and BPI, already do this, he notes. So does Spain’s development bank, ICO, and the European Investment Bank.
“They are basically the catalysts of investments in every single fund, because it’s an asset class that has a higher risk. The government needs to help [companies] out for at least the initial step of going into the market,” he says.
Convincing lawmakers to broaden the MDB’s remit comes with its own challenges, though. Every euro allocated to private equity is one less euro available to lend directly to SMEs and their vote-casting owners.
Malta’s stashed billions
Institutional investors like the European Investment Bank will play a major role in MCP’s upcoming €150m European fund, Alsina says. But there will also be plenty of room for local investors keen to diversify their portfolios.
“Malta has more than €20 billion in deposits [Central Bank data lists €26.5 billion in deposits by residents, with households holding €19.3 billion of that total]. People don’t know what to do with their money. There aren’t many products to invest in,” he argues.
The data suggests Alsina is right. Trading volumes on the Malta Stock Exchange are declining year-on-year, with MSE-listed stocks displaying very little liquidity. And as the MSE’s fortunes have slumped, real estate portfolios – and lending – have surged.
Alsina believes he can change that trend, and with it the fortunes of local capital markets.
“If the Maltese stock market has good companies growing in double digits every year and delivering dividends, people will invest.”
