Joint Ventures and Acquisitions in Spain 2013

Joint Ventures 2013

Joint Ventures 2013

Over the last few decades, the world has experienced huge growth in multinational corporations, many of which have been the fruit of mergers and acquisitions, or had their origins in joint ventures.

One of the most successful deals was the 1999 tie-up between US oil companies Exxon and Mobil to create industry powerhouse ExxonMobil. Closer to home, Spain’s top two banks Santander and BBVA have built their empires on mergers and acquisitions, while utility Iberdrola has become the world leader in wind energy after snapping up assets across continents.

In 2011 and 2012, the M&A business remained largely stuck in the doldrums as the uncertainty fuelled by the global economic and financial crisis continued to dent investor confidence. However, the outlook is brighter for 2013 if recent deals such as Berkshire Hathaway and 3G´s agreement to acquire H.J. Heinz for $28 billion is anything to go by. The transaction ranks amongst the biggest ever in the food industry.

BIG IS BEAUTIFUL

What are the benefits of a merger?

  • An opportunity to create synergies which lead to economies of scale, including a reduction in production and employee costs.
  • An opportunity for companies to grow market share. Investors can take comfort in the idea that a merger will deliver enhanced market power.
  • An opportunity for companies to raise more capital together than on their own.

What are the benefits of a joint venture?

  • The transaction is not transformational for an organisation. Two companies join forces to undertake a single project or aspect of a business, generally with a specific time frame.
  • A new investment vehicle may be formed in which each partner will take an operational and financial stake. Profits or losses will be shared proportionally.
  • A joint venture with a local partner is the best option for a company setting its sights on expansion into a foreign market.

TIMES ARE CHANGING

Deal-makers have begun to take the champagne off ice in 2013, particularly in the US, where economic indicators are improving and the wide gap between the yield on assets and funding costs makes M&A compelling.

Europe is also a more attractive prospect for investors than in 2012, despite its more laggard economic recovery. Many investors are now ready to look beyond the short-term crises, like the recent bailout of Cyprus and its effect on the eurozone economies, and focus on their specific needs for the long term.

In Spain, companies have deleveraged substantially in the last year, and valuations are now more realistic. This will fuel more acquisitions in the financial, infrastructure and health sectors, amongst others.

Interested in exploring a merger or acquisition in Spain? Contact Argali Abogados.

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