Increase in M&A Expected in Spain

Increase in M&A Expected in Spain

Increase in M&A Expected in Spain

Spanish companies are expected to be hot on the acquisition trail over the next 12 months, as confidence in the economic recovery continues to increase, according to consultancy firm EY.

Around 50 percent of the firms participating in the survey hope to be actively involved in M&A deals within the next year, says the EY Capital Confidence Barometer.

One in every four companies is evaluating at least five possible transactions within that timeframe, with emerging markets like China, India and Brazil on their radar as well as Spain.

Private equity firms are likely to broker many of these deals as experts believe corporate valuations in Spain – battered by the global financial crisis – are bottoming out and there are some prime assets for the taking.

 

MIDDLE-MARKET BUYS ON THE AGENDA

With Spain’s GDP growth forecast to outpace that of its eurozone rivals in 2015 and 2016, businesses are dusting off their expansion plans as financing also becomes more accessible.

After restructuring and recapitalising, the country’s banks are lending again. The European Central Bank’s liquidity shots are also helping to ease funding conditions.

Well over half of the deals on the cards in Spain and overseas will be middle-market buys, the EY survey said. So we’re talking about operations of around 250 million euros.

Sectors in vogue are technology and diversified industrial products, as well as other industries linked to key growth drivers like exports and domestic demand.

But what about the big guns who were so active in Spain in 2014?

Names like telecoms giant Vodafone springs to mind, as well as banks like Santander and Kutxabank, which sold off their property management businesses to top US investment funds.

The traditional uncertainty ahead of a general election is what is keeping large investors, both domestic and foreign, on the sidelines.

They are keeping their powder dry until a stable political landscape is guaranteed in the wake of the Spanish polls due to take place towards the end of this year.

 

MORE STRUCTURAL REFORMS NECESSARY

The current ruling conservative Popular Party has implemented a series of structural reforms to encourage local companies to grow their business, including a cut in the corporate tax rates.

Foreign predators also benefit from this measure, as well as other fiscal incentives if their investments create jobs.

What is important for future M&A activity in Spain is that regardless of which party wins, the new government is committed to further reforms to ensure investor confidence remains.

For more information on investment in Spain, contact corporate law firm Argali Abogados.

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