Company & Corporate annual report
Price war
Investors are currently involved
in a fierce battle to acquire
assets in Spain, but with many
clients worried about failing
to complete transactions, they
are becoming more inclined
to negotiate hard on fees –
meanwhile, in Portugal, despite
deals in energy, finance and
real estate, some argue investor
interest is waning
The fact that, in the context of
Spanish M&A, it is currently a
sellers’ market means that there
are a significant number of bidders
competing to buy any major asset
that becomes available. The good
news for lawyers is that with a
plethora of investors showing
an interest in most assets on the
market, there is high demand
for legal advice. However, there
is a downside. Given the fierce
competition between bidders,
investors know that there is a
reasonable chance that they may
not be successful in completing the
prospective deal – consequently,
some clients are reluctant to spend
significant amounts of money for
legal advice on a transaction that
may only have a slim chance of
being finalised. As a result, there is
significant pressure on fees, with
some lawyers admitting that they
will provide initial advice on a
transaction free of charge. However,
many other lawyers, understandably,
recoil at this notion and argue that
firms are too willing to acquiesce to
client demands and consequently
sell their services far too cheaply.
Meanwhile, in Portugal, while some
lawyers point to significant activity
in the country’s energy, finance and
real estate sectors, others say that
investor interest in Portuguese assets
has cooled somewhat in the last year.
Governance concerns
One of the major developments
in the last year is that corporate
governance has become a more
important consideration in M&A
deals, says Julio Lujambio, partner
at Pérez-Llorca. “There is great
attention on [companies’] internal
processes,” he explains. Lujambio
also says that, given that it is
26 • IBERIAN LAWYER • November / December 2016
currently a “sellers’ market”, there
are a lot of competitive bidding
processes. He continues: “This is
good in that there is a lot of room
for legal advisers, but the problem is
that it means lawyers are not always
completing deals.”
Increasing corporate governance
requirements mean that corporations
have to “pass more stages and
take more time” before they can
complete a deal and this means
that funds are sometimes winning
bids because they are more efficient
and quicker, according to Allen
& Overy partner Iñigo del Val.
However, Jorge Vázquez, partner
at Ashurst, says: “Many funds are
taking a more distant approach to
competitive bidding M&A processes
– or even withdrawing from them because they feel there is too much
competition. They are less willing
to spend time and money in these
situations because they feel they
have less chance of winning the
deal.”
There is money to be spent in
the Spanish market, says Garrigues
partner Javier Marzo. “Foreign direct
investment is growing, particularly
in real estate, and there are still some
opportunistic and distressed deals,”
he adds. “We are optimistic, Spain
is on the right path, 2016 will be a
good year.” Alejandro Ortiz, partner
at Linklaters, says there are a lot of
new players in the Spanish market,
including sovereign wealth funds,
Asian and Middle East investors,
and Canadian pensions funds.
He continues: “For example, LPs
[limited partners that traditionally
invest in private equity funds]
are now investing directly in
Spain and competing with private
equity funds – we are also seeing
traditional private equity funds
looking at medium-sized deals and
not only large deals as used to be
the case.” Another partner adds
that private equity funds that were
formerly looking for billion-Euro
deals, now see €300 million to €350
million deals a s the “sweet spot”.
Lawyers are being approached
by international investors regarding
potential M&A transactions in
Spain, which shows that activity
levels may increase in the near
future, says Clifford Chance
partner Luis Alonso. Meanwhile,
he adds that the role of general
counsel has been changing during
recent years and that they are,
consequently, much more involved
in the decision-making process:
“They [general counsel] are getting
closer to the CEO role, as legal
aspects of M&A transactions are
becoming more relevant year by
year.”
Free advice
The current market conditions
are leading to the creation of new
venture capital funds with around
€40 million to €50 million in funds
that are interested in investing in
Spain, according to Carlos Blanco
www.iberianlawyer.com