These are the most appealing sectors for M&A
Situations of economic stress create opportunities. This is our current scenario. Economic activity is gradually reactivating as we overcome the pandemic and this is boosting M&A deals. Mergers and acquisitions are thriving in Spain, as they reached USD99,492 million in 1,506 closed transactions in 2021, a 40% increase compared to 2020.
Over the next 12 months, high liquidity available, the arrival of European funds, easy access to funding, and businesses’ strategic review will all propel M&A deals.
The COVID-19 crisis has compelled many companies to carry out deep strategic readjustments, making them see the necessity to invest if they want to secure a successful recovery. Up to 37% of Spanish companies expect to undertake mergers or acquisitions soon.
International investors are also showing a growing interest in Spain, especially those funds that have not invested in our country yet. This will spur significant competition.
Consolidation or defence goals
At present, most mergers and acquisitions tend to be consolidation operations aiming to materialise emerging market opportunities, enlarge customer bases and market shares or drive geographic expansion.
However, other moves are more defensive in nature, with companies entering new partnerships to obtain resources to carry out acquisitions, or using State-guaranteed loans to sustain a strong position within their sector. This can also pave the way to combining an M&A deal with a refinancing.
Sectors most hit by the COVID-19 crisis are recovering
If we focus on sectors, companies most hit by the pandemic will close deals to strengthen their balance sheet in the upcoming months, either through partnerships or by combining M&A with refinancing. Industries that were considered no-go investments last year are exhibiting a great potential for recovery. This is attracting investors willing to analyse opportunities that they would have otherwise rejected not long ago.
Tourism sector
Despite its long-standing status in Spain, it also constitutes a clear example of how this intense M&A activity is being conducted in the sectors worst affected by the pandemic.
This can be illustrated by the recent deal concluded between El Corte Inglés and Logitravel to incorporate a new company with aspirations to become a global benchmark in the leisure and corporate travel sectors. At Confianz, we have also recently provided financial and legal advice as part of another major deal within the tourism sector: the purchase of leading travel agency Grupo Azul Marino by World2Meet, the travel division of hotel group Iberostar. By doing this, both companies intend to consolidate their future and shared growth.
In short, the hotel and holiday industries are once again gaining momentum, both in terms of real estate and operational opportunities, and we are witnessing the reactivation of some transactions that the pandemic brought to a halt.
Food sector
We encounter a double opportunity in the food industry. Firstly, distribution channels have displayed strong resilience throughout the COVID-19 crisis. Secondly, innovation in production techniques spawns a rising interest in those seeking new opportunities for growth.
The acquisition by Carrefour of retail business Supersol is an example of the M&A upswing in the food sector. In fact, this deal was concluded in September 2020, months before even the first vaccinations came about and we progressively began leaving the COVID-19 crisis behind.
Renewable energies
The energy sector is awash with opportunities as new technologies continue to surface. Spain plans to invest approximately EUR240,000 million over the next ten years to address its energy transition.
This is a highly fragmented sector with numerous firms and up to 300 small distributors. Corporate movements are frequent in the energy sector. In the past two years, more than 20 M&A operations have taken place in the onshore wind energy sector alone.
The smaller players in the renewable energy industry are currently being scrutinised by venture capital funds.
In conclusion, we face exciting times with promising expectations for mergers and acquisitions in Spain, and these will lead to major changes across multiple sectors.
Manuel Urrutia. Corporate M&A Expert Lawyer. CEO of .