The mergers and acquisitions market in Spain reflects a result at the end of 2022 of 3,060 transactions and a mobilised capital of approximately 108,086 million euros, according to the quarterly report of TTR (Transactional Track Record), the content of which is reported by El Confidencial. El Confidencial has also published a shorter version of this article, which you can read by clicking here.
These data are similar to those recorded in the same period of 2021 in terms of transactions, with a growth of 0.36%. However, in terms of capital raised, the figure decreased by 11.5% compared to the previous year.
Among the M&A transactions that stood out in 2022 was Repsol’s acquisition of Spain’s Asterion Energies, which manages renewable energy projects in Spain, France and Italy, for €560 million. The transaction was legally advised by Uría Menéndez and Latham & Watkins.
Also the acquisition by Telefónica Tech of the German technology company BE-terna GmbH for €350 million, a transaction advised by Clifford Chance, as well as the merger of Orange and Más Móvil, for €18,600 million and with the participation of the legal teams of Freshfields Bruckhaus Deringer, Pérez-Llorca and Jones Day.
Factors influencing operations in 2022
Factors influencing operations in 2022 include economic and geopolitical uncertainty, inflation and rising interest rates.
The war triggered by the Russian invasion of Ukraine has been the main focus of economic and political uncertainty in 2022. Since it began in February 2022, its influence on world markets and energy supply has been felt, something that has directly affected Europe and from which other players such as the US and China have benefited.
This invasion, in which Russia has used gas supplies as a weapon, is behind the energy crisis of recent months, which has led to an escalation in prices that has affected citizens and industries.
In this context, Russian energy supplies have decreased significantly. According to European Commission data, it has gone from accounting for 45 per cent of gas imports last year to 14 per cent in September 2022. At the same time, Europe has found alternative sources of supply and reduced its demand.
Moreover, among the measures implemented to mitigate price pressures on citizens and industry is the “REPowerEU Plan” to eliminate dependence on Russian fossil fuels.
This is a boost for the energy transition. The European Commission argues that the continued adoption of renewables in power generation, industry, buildings and transport will accelerate independence, boost the ecological transition and reduce prices in the long term. The Commission has proposed to increase the EU’s 2030 renewable energy target from 40% to 45%.
Meanwhile, inflation levels soared from February 2022 to reach 10.8% in Spain by mid-year, a situation that has been repeated both inside and outside European borders. In fact, the trend points to rates moderating in the coming quarters (something that has begun to be reflected in the data), as energy and food price shocks begin to ease. The big question for 2023 is whether inflation will be brought down to acceptable levels without producing a recession, or at least not a very deep one.
The year 2022 also saw one of the sharpest rate hikes in recent years. The European Central Bank (ECB) raised rates from 0% to 2.5% between July and December. Experts maintain that these rises will be maintained until inflation approaches the 2% target, a figure considered by the Bank of Spain to be adequate as it is low enough to take advantage of the benefits of price stability and, at the same time, to allow some margin to reduce the risk of deflation.
Key industries in the field of M&A
The factors indicated above have had an influence in one way or another on the transactions of 2022. Especially in an atypical year, which far from being marked by a return to normality and the end of health restrictions, has been characterised by the uncertainty derived from the invasion of Ukraine and the rise in interest rates and inflation.
However, it should be noted that these factors do not affect all sectors equally. In fact, operations have been concentrated in industries that for the moment seem to be resistant to the current context and where investor interest remains. Added to this is the weight of Spanish listed companies, which continue to be at the centre of major transactions.
The sectors that have been most active in 2022, according to TTR data reported by El Confidencial, are: i) real estate, ii) technology, iii) renewable energies and iv) tourism. This is explained because, in general, these are sectors with businesses that are less exposed to market fluctuations and are not affected by these factors.
In the case of renewable energies, for example, their boost comes precisely from the energy crisis and the commitment to accelerate this type of energy. This sector is of particular interest to international investors due to Spain’s renewable energy capabilities, as well as the growing interest at national and European level.
In sectoral terms, real estate closed the year as the most outstanding sector. Something that could already be expected before the end of 2022, given that during the first nine months of the year it reached, according to TTR data, a total of 468 transactions and an increase of 34% compared to the same period in 2021.
Analysis of M&A data in the light of the criteria used by publications such as Chambers and Partners to rank firms
Last year Chambers and Partners made a profound change in the ranking of the Corporate / M&A area in Spain, dividing the table between Corporate: High-end and Corporate: mid-market. This change responds to two main factors: firstly, the large number of firms that year after year submit submissions to this practice area in Spain and which have significant client support, coupled with the growing sophistication of a market which, as we have seen above, year after year exceeds its own expectations in terms of quantity and quality of M&A transactions.
Overall, the most prominent law firms during 2022, and which participated in the main transactions of the year, were Garrigues, Uría Menéndez, Cuatrecasas, Linklaters, Gómez-Acebo & Pombo, Freshfields, Jones Day, Allen & Overy, DLA Piper and Latham & Watkins.
The two main metrics, which publications such as the TTR reports use to rank the role of law firms in the M&A market, are participation in high-value transactions and participation in number of transactions. The following two tables show the results for the year 2022.
Ranking of firms by value of M&A deals 2022
Source: El Confidencial / TTR. Table: Gericó Associates
Ranking of firms by number of M&A deals 2022
Source: El Confidencial / TTR. Table: Gericó Associates
In this sense, the ranking for law firms in terms of turnover and number of M&A transactions reflects quite well the need for the legal directory Chambers and Partners to make this separation in the previous year. According to the ranking published by El Confidencial, based on TTR data, for the year 2022, the leading law firms in Spain in terms of value of M&A transactions were: 1) Uría Menéndez, 2) Freshfields, 3) Pérez-Llorca, 4) Gómez-Acebo & Pombo, 5) Jones Day, 6) Allen & Overy, 7) Linklaters, 8) Garrigues, 9) Cuatrecasas, 10) Latham & Watkins. On the other hand, in terms of number of transactions, the list changes as we see that firms such as Garrigues and Cuatrecasas are now at the top of the list, while firms that did not appear in the previous list do appear here: DWF-RCD, DLA Piper, Baker Mckenzie and RocaJunyent.
By contrast, all firms on the deal value list, except Jones Day, are ranked in the Corporate/ M&A: High-end Capability table, while of those on the list of firms with the most deals, only one firm has qualified for the Corporate/ M&A: Mid-market ranking, such as DWF-RCD.
The following table shows the relationship between the Chambers and Partners 2022 ranking in Corporate / M&A: High-end and the relative position of the firms in the lists by value and number of M&A deals in 2021:
Source: Chambers and Partners / El Confidencial. Table: Gericó Asociados
From the review of the table above, we see that there is a clear relationship between being a Band 1 firm in Corporate / M&A: High-end and being among the firms present in the highest value transactions, as can be seen in the case of Allen & Overy and Clifford Chance, who do not appear (or appear very low) in the list of firms with the highest number of M&A transactions in 2021. This is a clear example of the approach that directories such as Chambers and Partners take to assessing this practice area: sophistication is more valued than massiveness.
However, the interesting thing about Chambers and Partners’ methodological move is that it opens a space for firms that are not traditionally present in the lists of firms with the most M&A transactions or not in the most expensive ones to be ranked. Thus, in the Corporate/M&A: Mid-market ranking, for the first time in 2022, firms such as Araoz & Rueda appear in Band 1, Broseta Abogados and Mavens in Band 2, Andersen, Argali Abogados, Bird & Bird, DWF-RCD and López-Ibor among others in Band 3, and finally Ceca Magán Abogados, Augusta Abogados, Confianz and Dueñas Ruart Abogados appear in Band 4. In this way, Chambers reaches a total of 14 firms in the Corporate/M&A: Mid-market table and 27 firms in the Corporate/M&A: High-end category.
How does this picture look for the research period that now starts on 22 February for Chambers and Partners? In line with what we have already seen for 2021, we see that the trend in terms of the firms that are present in the highest value transactions and those that are present in a larger number remains relatively similar to the previous year. The new developments in this new period are the rise of Uría Menéndez, Freshfields and Pérez-Llorca to the top three positions in the table and the fall of Garrigues from number one to number eight in the ranking of firms by value of M&A transactions.
Another noteworthy development is the rise of Gómez-Acebo & Pombo from number ten to number four and the entry of Jones Day at number five. In this case, the challenge for firms such as Jones Day, Freshfields or Gómez-Acebo & Pombo is to translate this excellent performance into an improvement in their rankings in the Corporate/M&A: Hig-end Capability table: Freshfields could be in Band 1, Jones Day could enter the ranking, while Gómez-Acebo & Pombo would not be surprised to see it in a well-deserved Band 2 this year.
On the other hand, in relation to the table of firms present in a greater number of transactions, the entry in 2022 of firms such as RocaJunyent and Linklaters stands out. We also see the consolidation of DWF-RCD in this category, as well as the exit of King & Wood M. and Clifford Chance, firms that did enter the ranking in 2021. In relation to RocaJunyent, their active presence during 2022 in transactions suggests that we should see them in Band 4 of the Corporate/M&A: Mid-market table, while we should expect an improvement in the ranking of DWF-RCD in the aforementioned ranking.
Considering the various variables we have seen, we would expect a very good performance in this year’s research in Chambers and Partners from firms that are strong in practice areas such as Energy, Real Estate, Technology and Telecoms, which have been among the strongest sectors for M&A transactions in 2022.
In this sense, firms such as Jones Day, Araoz & Rueda, RocaJunyent, Bird & Bird, DWF-RCD and Herbert Smith Freehills could be said to be an example of firms that could aspire to improve their band in the Corporate/M&A rankings, considering that they have strong practice areas in the sectors that have had more transactional development and an expectant position in the Corporate/M&A tables. It should be noted that RocaJunyent is not yet ranked in Spain, but it is ranked in Barcelona.
Keys to reflect a good year in M&A transactions in a submission to Chambers and Partners
Firstly, be clear about the transactions made in the previous year and present them in the best possible way. Being aligned with market trends during the year is always an advantage, as Chambers’ researchers inquire into the trends of the past year that have driven the transaction market. Related to the above, as we have seen in this article, the M&A market last year was down in relation to either multi-million dollar or cross-border transactions so those firms that have had a good year in domestic mid-market deals will have interesting work to present.
Secondly, the Corporate/M&A ranking (in its two variants, High-end capabilities and mid-market) in Spain, today more than ever has its focus on transactional, therefore, firms should report this type of work with priority to other corporate advisory firms if possible.
Finally, and especially in the case of mid-market firms, it is essential not to limit oneself and to think that the work done is not necessarily highly complex and therefore rankable. This is something that Chambers and Partners or Legal 500 will evaluate, therefore, it is advisable that business law firms that move in the mid-market take risks and seize the opportunity that this year presents for this segment: this is the second year in which this research is carried out, so this is the best time to enter and/or progress in the ranking.
In relation to this segment, as the ranking for Corporate/M&A: mid-market in Spain has recently been created, this is the opportunity for firms in this market to be ranked, before it becomes a highly competitive table.
This is something that directories such as Chambers and Partners evaluate. It is advisable for mid-market firms to take risks and seize the opportunity.
Gericó Associates International Directories Practice area
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