M&A in Spain in 2021: Recovery Ahead
Expect a gradual rebound of dealmaking this year, with opportunities in Real Estate and Energy.
2 March 2021
Uncertainty still has a tight grip on the Spanish market as the country continues to wrestle with the COVID-19 pandemic. While organizations still come to the table with new deals — as evidenced by an increase in opportunity creation we saw in February — the presiding opinion is that Spain won’t regain 2019 levels of dealmaking until the second half of 2021. Despite gains made elsewhere and expected deals in the Real Estate and Energy sectors, this market is reactivating more slowly than in the rest of Europe.
There seems to be a disconnect on asset valuations and it has become a drag on the market’s recovery. Dealmakers are playing an elongated game of chicken: Sellers are not willing to sell at the prices that buyers are comfortable paying. In many cases, the default position is to just sit and wait. So things are progressing more slowly.
Areas of opportunity for dealmaking
Having said that, there are a few bright spots worth watching. Real Estate is already showing movement and will be one of the main focuses areas of mergers and acquisitions (M&A) over the coming quarters. Hospitality is another; mainly because large hotel groups occupy valuable assets that may be put up for sale to ensure their companies’ survival. This could prove to be a win-win: hoteliers will manage to stay afloat and investors will gain attractive touristic assets.
However, not all Real Estate assets are considered equal. Some will simply not be as attractive as others. Key players in the Spanish Real Estate market tell us that there will be a “bubble” in Logistics, Supermarkets and Residential Real Estate. In those sectors, prices have been growing with seemingly no limit, but experts believe there’s a ceiling fast approaching.
Bolstered by huge liquidity and a regulatory framework that promotes legal certainty, the Energy sector has demonstrated extraordinary resilience. Project financing is expected to increase based on a rise in renewable auctions and development around new technologies in batteries and green hydrogen.
In general, our Spanish clients tend to view 2021 as a year to recover trust in the markets. They don’t expect to see a big recovery in M&A activity until the second half of the year or even until 2022. Despite this, we will still see M&A deals driven by high liquidity in the market. Companies with liquidity issues will struggle to survive, and they will aim to sell their non-core assets in exchange for capital injections. These types of deals will increase in Q3 when the government removes the protective measures for companies.
For more 2021 insights into markets across the Iberian Peninsula, as well as other regions all over the world, check out our detailed predictions in the Q2 2021 SS&C Intralinks Deal Flow Predictor. Independently verified as a highly accurate six-month forecast of merger and acquisition (M&A) activity, the report is compiled by tracking early-stage M&A transactions that are in preparation or have begun due diligence globally.
Patricia joined Intralinks in 2008 as is responsible for the opening of the Iberia market. During this time, she has managed the expansion of the business in Spain and the consolidation of Intralinks as the leader in secure collaboration and virtual data rooms in the region. She helps companies and advisory firms to enhance their strategic transactions, streamline M&A projects, reduce risk and increase the success of their deals.