More UK lawyers expected on future Spanish M&A deals

Vodafone’s acquisition of Ono in a €7.2bn deal could trigger greater involvement of UK-qualified lawyers in Spanish domestic transactions

Legal market insiders are predicting that more UK-qualified lawyers could get involved in purely Spanish M&A deals as consolidation in the telecoms sector begins to gather pace following Vodafone´s acquisition of Ono.
As the majority of the players on the Vodafone/Ono deal were from the UK, the agreement was subject to UK law, which was an unusual choice for a transaction in Spain, according to one Madrid-based partner. “This does represent a change and you may start seeing more UK-qualified lawyers getting into purely Spanish domestic deals,” he says.  
As Juan Picón, Partner at DLA Piper – which advised Vodafone on the €7.2bn deal – explains: “For the debt side of deals the involvement of UK-qualified lawyers has been relatively common in Spain, whereas involvement of UK lawyers on the equity side is relatively uncommon.”

No surprise
For the lawyers working on the biggest M&A deal in Spain in recent years, the Vodafone/Ono acquisition came as no surprise, given Telefonica’s convergence of both mobile and fixed communications. “The reality is that the telecoms market in Spain is going through a significant consolidation right now, led by many factors, one of them being the convergence of fixed and mobile, ”says Picón.
Javier Marzo, Corporate Partner at Garrigues, the Spanish law firm that acted for Ono´s private equity funds together with the lead advisers, Weil Gotshal & Manges, agrees. “From a Spanish perspective, the writing had been on the wall for several months. Everybody was just waiting for one of these – Vodafone/Ono, Orange/Jazztel – transactions to be approved,” he says.
From a legal perspective, the Vodafone/Ono acquisition went far beyond the usual standard technicalities because of the timeframe involved. “Because of the nature of the sellers and the very limited timeframe, the diligence review became of paramount importance in the deal”, says Picón of DLA Piper’s role in providing the due diligence.
At the other end of the acquisition, Garrigues had the added complexity of having a well-advanced dual track IPO process. “It was a complicated transaction, as there needed to be two sets of legal documentation available and specific advice on both possible alternatives ready at all times, so that that if the negotiations with Vodafone failed, the IPO documentation would be in shape the next day,” explains Marzo, who worked on the deal with fellow Garrigues Corporate Partner Renata Mendaña.

Too high a price?
However, the need for full package offerings in the Spanish telecoms industry brings with it potential synergies that are found to be worth a great deal. There is a view among some lawyers, that Vodafone paid a rather high price for Ono, but Picón argues: “It seems to me the potential synergies are to be very significant. Vodafone will have an entry to not just Ono’s subscriber base but to its fix network, the technology and those people who’ve been familiar with fixed communications for a long period of time.”
As the Vodafone deal goes through antitrust clearance, lawyers are now closely watching what Orange and smaller regional cable operators do next to compete against Vodafone and Telefonica. “I think it’s going to be a very interesting year in terms of future consolidations in the telecoms sector,” says Picón. Pedro Pena, Secretary to the Board and Director of Legal, Regulatory and Corporate Security at Vodafone Spain, agrees; “Vodafone’s purchase of Ono is likely to be followed by other M&A deals in Spain. But while I would not venture any prediction about how many, or how large they might be, I presume none will be as large as this deal.”