Firms battle for share of surging Iberian M&A market

Latest rankings show five-fold increase in M&A deal value – this growth is set to be sustained, but, as firms compete for market share, some firms are drastically cutting fees

International firms are showing a greater interest in transactional work in Spain and Portugal as M&A deal values soar, and this trend is expected to continue in the coming year as new data shows that the value of deals handled by the 15 top-ranked firms in Iberia increased almost five-fold in the first half of 2014.
Mergermarket´s H1 2014 trend report showed that the total value of the deals handled by the top 15 ranked firms (by value) stood at $155 billion in the first half of 2014, up from $31.5 billion in the first six months of 2013. However, the total number of deals by volume increased only slightly during the same period – up from 153 to 167, a jump of nine per cent.
Freshfields Bruckhaus Deringer topped the table of firms ranked by value, advising on 14 deals with a total value of $21.1 billion. Second was Uría Menéndez, which advised on deals with a total value of $17.5 billion, while Garrigues – which advised on deals with a total value of $17.3 billion – was third.
With regard to rankings by volume, Uría Menéndez and Cuatrecasas, Gonçalves Pereira came joint top with 24 deals, though Cuatrecasas´ total deal value, at $2.2 billion, was dwarfed by Uría. Garrigues was ranked third with 21 deals.
White & Case opened in Madrid in 2013 and it is expected that other international firms will follow. A source at Uría Menéndez says that the increase in the value of deals is attracting greater interest in Spain from law firms looking to win instructions. “After some years of certain dryness in the M&A field, the fact that our economy is reactivating generates interest for all the players in the market – if the transactions are bigger in deal value, the interest generated will inevitably be bigger as well,” the source says. “We expect that M&A will maintain the trend next year as further international investments will most likely keep arriving to Spain and many assets are still to be sold.” However, whether this trend will translate into increased revenues for law firms advising on such transactions is open to question – lawyers argue that one effect of the increased competition in the market is that some firms are prepared to drastically reduce fees in order to win instructions.
One of the firms to report the biggest increase in the total value of deals handled was DLA Piper, which advised on eight deals worth a total of $12.2 billion in the first half of 2014, up from seven deals worth a total of $1.6 billion in the same period the year before. The most significant deal DLA advised on in the first half of this year was Vodafone´s €7.2 billion acquisition of Ono.
DLA Piper partner Juan Picón says: “We have witnessed a number of large M&A deals throughout the year, the likes of which have not been seen for along time.” He adds that private equity houses have been among the most notable players. Picón says that firms that have the ability to cope with large multijurisdictional deals have an advantage in the current M&A market.
Meanwhile, the privatisation programme in Portugal has played an important role in the growth of the Iberian M&A market, according to Picón. “It [the privatisation programme] has boosted confidence in a movement that has been followed by international private equity and funds,” he says. “The existence of very good assets, at a good price, in a moment where the crisis seems to be under control, is definitely a trigger, and the use of Portugal as a springboard into other Portuguese-speaking countries in Africa creates the opportunity to generate additional value.”
The major audit firms featured prominently in the table ranking firms by deal volume. PwC Legal was ranked fifth, with 14 deals, up from five deals in the first half of the previous year. Meanwhile, KPMG was ranked sixth with ten deals, down from 15 in the same period in 2013, however total deal value increased by 19 per cent to $11.1 billion. Deloitte Legal was ranked tenth with seven deals.
However, Cuatrecasas partner Victor Xercavins argues that the major audit firms do not figure prominently in the biggest M&A deals. “The ´Big Four´ are growing in our jurisdiction – mainly in tax and consultancy – but they are clearly less active in the high-end M&A market.” Xercavins says that, if a firm has a high ranking in the deals by volume table, it shows “deep market penetration that results from its participation in many ranked deals”. He adds: “An increase in the value of deals does not directly imply more revenue, which depends on many factors, including fee agreements, costs incurred and length of negotiations – an increase in the volume of deals normally implies more revenue, but this depends very much on each case.”
However, one managing partner at a global firm with a presence in Spain says: “These rankings are a useful marketing tool.”