PORTUGAL Trends and Developments Contributed by: Duarte Schmidt Lino, Tomás Almeida Ribeiro and Maria Almeida Pulido, PLMJ
Growing Interest in Defence and Dual-Use Technologies An emerging area of interest in the Portuguese private equity space is the defence and dual-use technolo - gies sector. As global defence budgets expand and technologi - cal innovation accelerates, investors are increasingly looking at opportunities in areas such as cyberse - curity, unmanned aerial vehicles and artificial intel - ligence-powered defence systems. There are two notable examples of this trend. The first is the NATO Innovation Fund’s (NIF) EUR70 million investment in Tekever, a Portuguese company specialising in drone technology and the most recent unicorn in the Por - tuguese private equity landscape. The second is the NIF’s investment in an early-stage deep tech venture capital fund managed by Faber – Faber Science II, for - merly named Faber Tech III. These high-profile invest - ments have lent credibility to the southern European economy and the sector, and they are likely to encour - age further public and private participation. Portugal’s strategic alignment with NATO and the EU, combined with a supportive regulatory environment for innovation in the defence space, is generating momentum. However, the sector does present legal and ethical complexities. Navigating regulatory com - pliance, dual-use export controls and ethical stand - ards will be essential for ensuring that investment in this domain is both sustainable and responsible. Nevertheless, the defence sector is rapidly becoming a key frontier for industrial transformation and value creation in Portugal. Continuation Funds as a Response to Market Volatility In the context of global macroeconomic uncertainty, the use of continuation funds has grown markedly, including in the Portuguese market. These vehicles allow private equity firms to extend their holding peri - ods for high-performing assets, while simultaneously providing liquidity options for existing limited partners. In 2024 alone, 65 continuation funds were launched globally, raising approximately USD36 billion. In the Europe, the Middle East and Africa (EMEA) region, the number of such vehicles nearly doubled compared to the previous year.
vate equity transactions amounting to EUR868 million and 61 asset acquisitions totalling EUR1.89 billion. Although there has been a decline in the amount of private equity capital deployed – down 26% year- on-year – deal volume has remained relatively con - sistent. This suggests a recalibration of investment strategy rather than a loss of appetite. Investor focus has shifted from high-value distressed acquisitions to smaller, more targeted deals with long-term growth potential. Notably, sectors such as software and IT services, real estate, tourism, education, renewable energy and data infrastructure continue to attract sig - nificant private capital. The emphasis on technology- driven industries underscores Portugal’s alignment with broader international investment trends. Private equity in Portugal is no longer defined by turnaround scenarios or opportunistic restructuring. Instead, investment capital is increasingly being chan - nelled towards companies pursuing scale, innova - tion and international expansion. This strategic pivot reflects a deeper transformation of the country’s eco - nomic profile and its positioning within global capital markets. Consolidation as a Growth Strategy for SMEs A defining feature of the Portuguese economy is its reliance on micro, small and medium-sized enterpris - es, which represent more than 99% of all companies and account for approximately 70% of employment. While this SME-driven model contributes to entrepre - neurial dynamism, it also creates systemic limitations. Many small enterprises face barriers to accessing capital, struggle to achieve operational efficiency and lack the scale required for international competitive - ness. Private equity has a critical role to play in overcom - ing these challenges. Through sectoral consolidation, particularly in industries such as services, manufac - turing, retail and technology, private equity funds can help create larger and more resilient entities capable of competing globally. As Portugal seeks to build a more robust economic foundation, the transformation of its SME sector will be instrumental.
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