Mergers & Acquisitions in Spain
After the 2008 crisis, Spain has become an attractive country for profitable business, as worldwide investors have seen in its location, human capital and modern infrastructure network as the best foundations for their new businesses.
Located in Southern Europe, the country’s connections with North Africa, the Middle East and South America are formidable. Numerous investors desire to take advantage of Spain’s geography, and open their first business in the sunny country as a gateway between these regions and the European Union. We can help you: once the company is set up in an EU country, it is easier to expand it through it.
From Crisis to Opportunity in Spain
Since Spain recovered from the financial earthquake, there has been a huge improvement in its facilities for foreign investors, providing them with excellent incentives and a more attractive business environment. However, it is still a complex process and it is difficult to specify how long a standard process transaction could involve. Every transaction is unique in itself, and it will be influenced by the parties involved, type of company, business, or assets. In other words, every factor could change the whole process.
A corporate merger occurs when a company is purchased by absorbing their estate, business or their business model by another company. The fusion could be carried out for two or more companies and the result may be a new company and the extinction of the old ones. In any case, it involves the existence of another company that executes the purchase.
Acquisition means the sole purchase of a business or asset. The structure is conditioned by the type of corporate purchase. Itmight be a Spanish Corporation (Sociedad Anónima or SA) or Spanish limited liability company (Sociedad de Responsabilidad Limitada or SL). In both cases, these companies could have restrictions of the transfers of their stock capital by law, their internal arrangements or issues of another nature that might delay the purchase or make it more complex.
There are some restrictions on the transfer of shares. For instance, in SL companies selling shareholders have to offer their shares (participaciones) to shareholders that are already in the company. Furthermore, they must be transparent so existing shareholders can match the terms of a sale that has been negotiated with a third party. Besides, there are sectors where foreign investors might not have the chance to operate, such as national defence, airlines, gambling and TV and radio. Beyond this, there is a completely open market for foreign investors.
Phases of the Merger & Acquisition Process
The process can be divided into several phases:
- Beginning of negotiations. Parties shall discuss in terms of transaction beforehand. Traditionally, in Spain, it begins with a formal “Letter of intent”. The main aim of this document is to set goals and define predisposition with regard to the operation. Nonetheless, the document does not carry any legal value to the negotiation, as long as the parties respect the principles of good faith and honest conduct.
- Due diligence process. Once the main terms of the purchase have been agreed, it is advisable, but not mandatory, to carry out a complete examination of the purchase. The main matters to review in this phase are respect for commercial, real estate, administrative or public law and compliance. Employment and tax play a vital part in this part. Thus, there are specific rules for these kinds for transactions regarding the rights of workers of the purchased company. The vendor will provide access to its facilities, documents and information as necessary to facilitate the process. The results of due diligence will have an impact on the representations and warranties that the purchaser requests from the vendor, and in some cases it will determine a significant change in the final price of the purchase.
- Acquisition agreement. The final contract or agreement based in previous phases; it will contain the details of the acquisition and it has a legal value.
How Long Do Negotiations Take?
How long each phase will take is impossible to determine. It depends on the size of the transaction, if there are international assets across different jurisdictions, or simply the attitude of the vendor regarding the sale.
The main complication is the absence of a specific law or act to regulate merge and acquisitions. In fact, there are multiple rules and these are very specific: corporate law, civil code, commercial code and, depending on the asset, one or another operate. It is pivotal to have as good advice as possible, and hire a team of professionals with experience and large knowledge of the Spanish regulations.
There are so many factors to consider when such a financial decision like investments or mergers have to be done. It is a complicated matter, and carrying out in a country where you might not master the language, or the law, could result in legal issues that can be easily avoided by the correct legal advice.
Del Canto Chambers can help you with:
- Initial assessment of investment opportunities
- Identification of suitable business partners
- Optimisation of corporate structure and location
- First contacts with desired acquisition or merger
- Careful asset analysis
- Day-to-day management of negotiations
- Satisfactory outcome to negotiations
- Legal assurance to avoid future issues
- Onboarding of new employees and systems
Got Questions about Mergers & Acquisitions in Spain?
To make a no-obligation enquiry, please call us on +34 91 080 08 85 or fill out the form below.