Spain – Progress amid uncertainty

Activity

Now happily leaving the ghosts of the pandemic behind, the M&A sector rebounded to pre-Covid rhythms, with PE funds showing considerable appetite for both diversification and integration opportunities, and with plenty of companies keen to seek financing and investment to fund growth. However, despite a promising start to the year, the political climate in Spain pushed several transactions back to the last months of the year, leading to a fall in deals during mid-2023.

Overall, M&A deals decreased in number and volume compared to the preceding year. However, the market remained strong, with plenty of ongoing deals and transactions that show promise for the year to come.

Sectors

Despite slight decreases in the number of transactions, M&A deals in technology (especially those relating to internet services and software) and renewable energy projects still rank high among sectors in which the market has been growing strong and more confident, and that are particularly sought after by private equity funds. And an enduring favourite, telecommunications, continues to deliver, with the largest deal of the year being Zegona’s acquisition of Vodafone’s Spanish arm for €5 billion.

Real estate – Is the hype still strong?

Ranking first in value of deals in 2022, real estate struggled to retain a strong position in 2023 as investors sought to cope with uncertainty in the pricing of debt and the outlook for office assets.

Legal trends

The Spanish government has confirmed the provisional foreign investment restrictions implemented during the Covid-19 pandemic, in line with EU regulations and with restrictions implemented in other European countries. Given that 2023 was an election year in Spain, and especially since the government had brought forward elections to Q2, there was some uncertainty on the authorisations that would be granted before the new government took control. However, those authorisations finally came through.

Slow but steady pace – Will this slower timeline for deals continue?

Major political and global events this year have sown uncertainty, influencing and indirectly affecting M&A deals, as we discuss here in our global report. Auction processes have lasted longer than expected and the sell-side has had to cope with bidders taking their time to make informed decisions when the waters finally grew calmer. There is now renewed hope after the storm and, although slower, interest in the market and involvement by all parties was steady throughout the year.

Outlook for 2024

The market is currently quite active, with expectations high for 2024. The pipeline of auctions expected to launch early this year is generous and notably larger than what was available during Q1 2023, with PE funds working hard on the sale side. Having overcome the political uncertainty inherent to an election year, PE is (again) set to lead the market, both in number of deals and value, proving once again that there is a significant appetite for investments in Spain both by national and foreign investors (the latter primarily from the US and the UK).

How will 2023 go down in history?

Following the steep increase in transactions as the impact of the Covid-19 pandemic began to recede, 2023 was calm, a year in which investors sought comfort and stability following the rush of the last couple of years. An optimistic sign for the future is that – even in these slower times – interest and engagement has remained high, with prudence dictating processes and timelines. And although numbers were not as high, 2023 proved that the market is strong and more than capable of adapting to uncertainty (and even able to generate significant profits on the go).