Mergers & acquisitions … a market rebound in 2013?
After 2012, when M&A activity worldwide was similar to that recorded in 2011, but much lower in Europe and in Spain (and far short of the 2006 and 2007 levels, according to Mergermarket and Thomson Reuters), various studies by consulting firms and international and rating agencies now appear to foresee a certain degree of recovery in the Spanish mergers & acquisitions market in 2013.
These studies point to moves essentially in the financial sector, as institutions need/are required to restructure their balance sheets and reorient their business. Foreseeably (in some cases necessarily, according to the commitments assumed) this will lead them to dispose of non-strategic assets or of complete portfolios of assets (mainly loans) which, already impaired and for which provisions are recognized in the balance sheets, will no longer be a source of losses for the banks.
More acquisitions in the real estate sector may also be on the cards, due to the creation of SAREB (the “bad bank”) which has acquired a huge real estate portfolio that will be gradually sold off, and to the financial difficulties faced by many real estate companies that will be forced to sell assets or restructure.
In addition, divestment moves are also expected, by companies with high debt levels, in the public sector (privatizations) and in private equity, in areas such as infrastructures, energy, construction and services, industry and hospitals.
Lastly, there are industrial companies whose businesses remain viable even though they are subject to insolvency proceedings due to difficulties obtaining funding. With the backing of the insolvency rules and the labor reform, opportunities could emerge for acquisitions, at reasonable prices and with limited risk, of businesses that, once duly restructured, could be profitable.
The downside however is that funding, which is absolutely essential for M&A transactions to resurge, is still at rock bottom and the alternative channels remain immersed in their own problems, including the unpredictability of the capital markets.
Nevertheless, it would seem reasonable to conclude that this is now a good time to invest, and there are good opportunities out there. Financial institutions, the public sector and highly-leveraged companies all need to divest, price levels look attractive, and economic recovery is expected in Europe and in Spain (or at least there is growing optimism that it might be on its way), all of which may make investment in Spain a very attractive option.