Company & corporate annual report
Investors on
edge
M&A activity in Iberia is on the
increase, in part due to the
availability of cheap finance –
however, there are fears political
instability could derail transactions
Money is cheap at the moment.
Companies have a wealth of
options when it comes to securing
finance for acquisitions, including
credit funds or private equity
funds. In general, the role of banks
as providers of finance is waning.
Consequently, there has been a
healthy level of M&A activity
in Iberia in the energy, telecoms
and banking sectors. The bad
news for law firms is that the
market for corporate and M&Arelated legal advice is becoming
more competitive, with the result
that there is increasing pressure
on fees. Another challenge for
law firms is how to adapt to
an environment in which inhouse legal teams are becoming
increasingly adept at handling
corporate and M&A matters
that may have previously been
outsourced to external lawyers.
However, despite these concerns,
M&A lawyers are optimistic about
the year ahead.
According to Jorge Vázquez,
partner at Ashurst, there is
an increasing trend in which
companies are looking at different
ways to obtain financing. “For
example, there may be credit
funds that provide financing for a
longer term – at some additional
cost – which can be made to match
the exit strategy of the investor,
thus taking refinancing concerns
away from the table for a long
period.” He adds that another
significant development in the
last year has been changes to the
insolvency law, which means
companies which came out of
insolvency have a window of
opportunity to make changes to
the CVA’S (convenios) agreements
they have with creditors.
Clifford Chance partner
Javier García de Enterría points
out that the market is currently
characterised by the availability
of many sources and providers
of financing and, consequently,
there is a lot of “cheap money”
available. Alternative financing
26 • IBERIAN LAWYER • November / December 2015
formulas that improve conditions
for borrowers, such as ‘Term Loan
B’ structures, are emerging says
Linklaters partner Alejandro Ortiz.
He adds: “These provide borrowers
with some of the advantages of
the high yield bond structures,
but without their inconveniences
in terms of costs, for example.”
In addition, private equity funds
are also looking to invest in Spain,
according to Roca Junyent partner
Jaime Espejo Valdelomar. He
continues: “Private equity funds
have fresh cash and they are
looking for opportunities.”
Banks’ role diminishes
There has also been a recovery
in the capital markets, which
has generated funding through
listings, according to Cuatrecasas
Gonçalves Periera partner Federico
Roig. He adds: “We´re seeing AIMlistings for deals in Spain – there
is also a lot of cash available and
interest rates are low, however
will interest rates remain low?”
Gómez-Acebo & Pombo partner
Fernando de las Cuevas says that
one of the trends in the market is
the “diminishing role of banks” in
providing finance – he points out
that this is demonstrated by the fact
that while, in Europe, 80 per cent
of financing is still provided by
banks, in the US around 80 per cent
of financing is supplied by “nonbanks”, such as funds and capital
markets, for example.
An “improvement in valuations”
is incentivising M&A activity,
according to Uría Menéndez
partner Juan Martín Perrotto. He
continues: “The devaluation of
the Euro brought a number of
investors into the market, while
new players were also attracted by
energy reforms. We’re also seeing
consolidation in the telecoms,
energy and banking sectors.”
M&A activity and liquidity
is increasing at a good pace,
according to Lener partner Álvaro
López-Chicheri. “However, there
are not that many companies that
are in a good condition to receive
investment – capital is ‘anti-risk’
and funds are doing a lot of due
diligence,” he adds. Ortiz says
that there are some potential
transactions in Spain that are on
hold as companies wait to have
“another year of good results”.
Uncertainty in an election
year in Spain could impact on
investment, according to De
las Cuevas, who highlights one
party’s proposal to do away with
the recent labour reform as having
the potential to unsettle investors.
Meanwhile, Espejo Valdelomar
believes echoes the imminent
Spanish elections have led to a
slowing of M&A activity.
‘Dual track’ trend
Perrotto says that in the case of
some deals, acquirers have been
allowed to pay the price in cash or
any other marketable security, that
is a listed security with a certain
rating. He adds: “There have also
been pre-emptive bids where
www.iberianlawyer.com