The panorama of corporate operations in the middle market in Spain has substantially improved throughout the last two years, and the number of these kinds of operations has significantly increased as compared to the previous years. Several factors have contributed to this improvement.
On a national macroeconomic level, a good part of the variables affecting the operations of companies have improved in our country, especially the notable increase in the GDP (Gross Domestic Product) (+3.2% in 2015 and expectation of ~+2.8% in 2016), due to, inter alia, the favourable progress of receptive tourism –mainly from abroad– and the recovery of private consumption. The interest rates at historic minimums are also significantly favouring our economy, facilitating, in the case of families, both an increase in consumption and the reactivation of the real estate market and, in the case of companies, reducing their capital costs, which favours investments and makes projects (creators of value) profitable which, in a different context, might not be so.
It is true, to be fair, that other variables show a less favourable picture of our country; public deficit and its close relative, the level of public indebtedness, which already exceeds 100% of the GDP, or, significantly, unemployment, which means a tremendous social and economic burden for Spain and which, in the case of the youth unemployment, should constitute a truly national emergency.
In any case, the recovery of our economy has not gone unnoticed by foreign investors, who have again considered Spain as a reliable attractive country for their investments, especially within a context in which our economy is growing at a much faster rate than in other countries around us and in which the prices of some assets (i.e. real estate) had considerably dropped during the recession.
Spanish companies, for their part, have done their “homework” during the last few years, developing operational restructuring and cost rationalisation processes, deleveraging themselves from a financial indebtedness perspective and, notably, opening up internationally, strengthening their exports or by means of their direct implementation in other countries, which has probably been the only positive consequence of the recent economic crisis.
Another aspect that has contributed to the increase in corporate operations is the availability of financing –there is a very high level of liquidity at present– an essential aspect for this. Furthermore, companies (especially those which are medium-sized) have at this time a wider range of options for financing than in the past. The “classic” alternative of bank financing is still open, which currently shows a great appetite for financing this kind of operation, as well as other new ones in our country, such as, for example that of investment funds (more flexible financing than banking, which is better adapted to the specifics of each operation and which is ready to assume greater risk shares, in exchange, however, for higher rates).
As regards investors in capital or shares (equity), they have also been very active in recent times. Most of the managers of capital risk funds have launched new investment vehicles (funds), participated in by national and international private institutional investors, as well as by national public investors (special mention should be made here to the role of the ICO as an institution working as a catalyst for this sector). Moreover, other alternatives such as the MAB have grown considerably, although they have not been free from certain negative aspects (i.e. the success of the SOCIMIs, which contrasts with the deficiencies in the supervision of some companies).
Although the political instability in Spain during the last year and the uncertainties in a European and world macroeconomic context have relatively overshadowed this scenario, the ultimate reality is that the present is very favourable for corporate operations.
Those companies wanting to receive support from acquisitions as part of their growth strategy can benefit from this, as well as shareholders looking for a financing partner helping them to grow, strengthening the equity of their company at the same time, or, alternatively, those that simply want to divest and capitalise on an individual level the value generated as shareholders of their companies (many of them family undertakings) for years or even whole generations.