Thought leadership from our experts

M&A in Spain. Momentum

Low interest rates has clearly been one of the key pacesetters of M&A activities in Spain in 2018 and up to now in 2019. There have, however, been other factors. Economic and legal stability have also contributed to boosting the number of M&A deals in Spain, both in private equity and industrial sectors, but transformation is the main gamechanger.

Private Equity

2018 was an outstanding year for private equity. According to the Spanish Venture Capital & Private Equity Association (ASCRI), the total investment volume in the Spanish private equity market last year reached a new record of close to €6,000 million. This was driven by a number of factors; namely the number of big-ticket equity deals above €100 million, the intense activity of international funds, the outstanding performance of the middle market, increased fundraising by private domestic firms and dynamism on the divestment front.

In terms of size, the eight largest deals totaled €3,697 million and represented 63% of the total investment volume whilst the middle market (investment deals between €10 million and €100 million) boasted 56 investments and a total volume of €1,467 million.

Looking at the type of investor, international funds accounted for 77% of the total investment volume which keeps suggesting that Spain is the "place to be". Having said that, experienced domestic players have also been highly active. As regards divestments, 47% of exits took the form of sales between private equity houses while 24% went to industrial operators.

As for 2019, there are no visible signs of slowdown in the private equity industry in Spain. On the contrary, the fundraising carried out by international and domestic funds in the previous years, the envisaged interest rates and the investors' demands for alternatives to "put money to work" suggest that 2019 will continue to be buoyed by the strong tailwinds from the years 2017 and 2018.

Industrial M&A

Just like the private equity sector, the industrial M&A market in Spain is also in excellent health. Perhaps one of the most distinctive features of the market is the growing internationalization of deals subject to Spanish law. There is also an increasing trend in the sector to adopt contractually sophisticated practices that are becoming the norm in the private equity market.

One such example would be R&W insurance policies; a tool that industrial operators are gradually becoming acquainted with. Initially envisaged as an ideal instrument for sell-side private equity funds in a hurry to be liquidated or to distribute all the divestment proceeds to its investors, or to simply as a tool to encapsulate the risks attached to a breach of representations which financial investors are not prepared to assume, R&W insurance policies are progressively becoming an acceptable alternative in industrial M&A transactions. In fact they appear at the top of our clients' options menu.

Other specific concerns affecting reputation are also taking greater center stage in a sector that is constantly adapting to its social and economic environment. A good example of this is the "Weinstein" clause, named after the producer Harvey Weinstein, whose misconduct and scandals propagated the #metoo movement.

Just as the legal market reacted to corruption issues in recent years by implementing stricter indemnity representations and obligations, the M&A industry is continuously acknowledging that such movement does not only have a significant bearing socially – it can also pose business risks where there is a lack of proper contractual regulation.

The inclusion of specific representation clauses in this regard indicates the importance given by purchasers to have sellers list the existence of any complaints of abuse or harassment against their key officers irrespective of the amount of the claim, amongst other factors. In the absence of specific indemnities, customary comprehensive representations for litigation or labor law compliance purposes may not be effective when dealing with claims for damages arising from harassment, relatively minor in nominal figures compared to the actual value of a multimillion-dollar deal but huge, and even devastating, in terms of reputational impact, especially in the context of a major deal.

The effectiveness of these kinds of clauses is still open to debate. In Spain, the need to properly evidence damages complicates their enforceability and more so when parties agree that reputational damage also qualifies for compensation. But even in such circumstances, the cautious approach of the Spanish judiciary to awarding reputational damages might ultimately mean that these kinds of clauses may only prosper in other jurisdictions.

The mere existence of all these items on the agenda indicates that the M&A industry is thriving and relentlessly evolving. This is also accompanied by the increasing importance of the digital sector in transactions or rather the escalating digitalization of all sectors, which is progressively reshaping the landscape of transactions and, in particular, the risk factors and the mechanisms to contractually address them.


M&A is a key line of business for Garrigues. Our firm has always been firmly committed to this industry and has become an indisputable benchmark provider of tax and legal advice to funds, management teams, finance providers and other industry players. We work for local and international funds, advising management teams, investors, credit institutions and other finance providers, and all kinds of sponsors, whether public or private. Our multidisciplinary focus and expertise enable us to provide comprehensive advice on M&A and private equity deals, bringing added value to our clients and taking part in the most prominent, complex and sizeable transactions in the market.

In 2018, we participated in 126 M&A deals with an aggregated value of more than €33,000 million, being the leading firm in Spain. In the private equity arena, Garrigues has also led the market in Spain, and worked on 49 transactions with an aggregated value of more than €14,500 million, providing advice to the key international and domestic players in the market and partaking in some of the most relevant deals.

In Newtonian mechanics, momentum is the product of the mass and velocity of an object. Momentum in the M&A world would be the result of combining low credit rates with change at all levels, both of which have been administered in great doses so far in Spain.