In the current environment of uncertainty, M&A transactions with Spanish participation reached 40,500 million dollars (39,928 million euros) in the first half of 2022, 21% less than in 2021 according to data from Refinitiv (part of the London Stock Exchange Group ). Mergers and acquisitions with a Spanish objective totaled 34.7 billion dollars, 4% more, reaching the highest global amount in this period since 2018.
Despite the decrease in volume, Bosco De Checa, M&A partner at Allen & Overy, confirms the dynamism of the semesterfollowing in the footsteps of 2021. “However, the current global situation and the rise in interest rates make us more cautious in our forecasts for the end of the year. Investor interest in Spain has not ceased and we have leading companies in its sectors, but we will have to see how the sector evolves in the coming months”.
The M&A market faces great challenges. The War in Ukraine and the pandemic have altered the business status quo along with the ECB’s historic move with a 50 basis point rate hike. The question is how this scenario will affect the transactional market. José Antonio Zarzalejos, Corporate Finance and M&A partner at KPMG, acknowledges that “we have noticed some slowdown in activity over the last six to eight weeks, but levels remain high. Without a doubt, part of the market is discounting a second half of the year with more challenges and unknowns at the macro level that we will have to see when and how they impact business activity.”
For his part, Bosco De Checa considers that the current situation should not affect all sectors equally. “In those assets whose business is less exposed to the ups and downs of the market, we can continue to hope that their valuations will continue to hold,” adds the Allen & Overy partner. An opinion shared by KPMG, which anticipates a concentration of investment in sectors capable of absorbing inflationary pressures. “The dynamics in consumer discretionary, distribution and leisure segments may be altered after the summer, which will probably translate into valuation adjustments. The opposite will happen with more defensive markets such as health, pharmaceuticals, technology or education, where we do not anticipate relaxation significant increase in valuations or transactional activity”, adds Zarzalejos.
Sectors in focus
Private equity will continue to be, experts insist, a great driver of M&A during the second half of the year. From Cecabank, as a depositary bank, they observe how the fund managers are “on the lookout” to see how the high global uncertainty evolves to make a move. “From there, we anticipate more liquidity movements,” explains César Gil Barrero, director of Treasury and Sales at Cecabank.
The ability of private equity funds to “integrate, consolidate and create larger groups is fabulous and is a great support for the Spanish economy. I wish more national champions were created,” says Yolanda Gómez Segura, deputy director of Cofides. Although there are ongoing divestments, the funds will have to refocus on their portfolios and in companies to re-balance their portfolios. From the listed German holding company Mutares, Santiago San Antonio Alonso, Head of Iberia, is also betting that the “large conglomerates in Spain will once again review their portfolios to get rid of non-strategic assets or subsidiaries. “In some cases, the decision to put into The sale of certain companies will be delayed pending a more favorable market moment”, explains Miguel Contreras Tamayo, partner in charge of Health and Pharma at PwC Deals. In this context, investors will also be more selective when analyzing the assets and sectors .
Among the key markets that will take center stage in the coming months, experts bet on energy, infrastructure, health and technology, which will continue to be attractive to investors. “Large companies will also value the possibility of giving entry to strategic investors to promote their business plans in internationalization, financing or digitalization processes. Likewise, the approval of the new Bankruptcy Law will surely facilitate an increase in “loan to own” operations. , adds Bosco De Checa.