High demand among investors for Spanish assets has created a ‘seller’s market’ – Uría Menéndez

Increase in M&A and private equity work expected in 2018 with further consolidation and deleveraging expected in the industrial sector

Following a strong 2017, Spanish corporate lawyers are expecting continued growth in the M&A and private equity market in the year ahead. The growing desire to invest in Spain has also created something of a seller’s market, especially in the financial sector.
“Iberian M&A activity grew significantly during 2017, with an increase of 8 per cent by deal count and 44.2 per cent by value over 2016,” says Juan Martín Perrotto, a corporate partner in the Madrid office of Uría Menéndez. “The year 2018 will inevitably be active – on the industrial side, drivers include the need for consolidation after years of stagnant organic growth and a continued drive towards deleveraging,” he explains. “In the financial sector, private equity is taking advantage of the seller’s market to divest portfolios while banks continue to dispose of non-core businesses, which is driven by a desire to improve capital ratios.”
The expectation is that sellers will have the advantage in the transactional market for the foreseeable future. “The market will remain a seller’s market,” says Perrotto. “This fact will reinforce current trends for seller-driven transactions and pro-seller transaction terms, with increased used of, for example, warranty insurance, lock-box and earn-out mechanisms, and the allocation of antitrust and regulatory-execution risk to buyers.”
For corporate lawyers advising on these transactions, the challenge is to keep a handle on the multiple competing interests in deals that are increasingly complex. “Limited assets and excess liquidity have resulted in increased pressure when it comes to managing a process with multiple buyers and short timelines, all in the context of the requirement for creative structuring and solutions,” says Perrotto. “This environment obviously results in challenges for legal counsel when advising both bidders and sellers.”