Market trends in Spanish private equity transactions

This study, an overview of market trends in private equity transactions in Spain and Portugal, analyzes the most significant deals on which Cuatrecasas advised. It analyzes 45 private equity deals signed in 2023 and 2024 (30 in Spain and 15 in Portugal) with transaction values over €10 million in Spain and without limitation in Portugal.

Spain: 2024 Market trends at a glance

• There was a rebound in disinvestments of private equity funds, encouraged by moderating inflation and lower interest rates and longer holding periods of portfolio companies.
• Once again, transactions focused on the energy and TMT sectors, while the life sciences and chemistry sector was reactivated.
• Roll-over transactions were the rule for majority shareholding acquisitions.
• The number of private equity transactions run as auctions continued to grow in 2024.
• Only half of the transactions included a condition precedent, which is less than usual.
• The Spanish government is increasingly imposing more conditions for FDI authorization, and a more extensive and stringent application of controls on FDI and FSR is foreseeable.
• Antitrust and obtaining third-party waivers were the most common conditions precedent agreed.
• Break-up fee penalties were particularly high in 2024.
• Locked-box mechanism remained the most used pricing mechanism in 2024, but to a lesser extent than in 2023.
• Equity ticker usage dropped considerably in 2024, while the practice of adding interest to the leakage amount is on the rise.
• Working capital was the most used financial parameter for the post-closing adjustment.
• In 2024, the use of the completion accounts mechanism was again far more prevalent in M&A transactions led by corporations than in PE-driven deals.
• The use of earn-outs continued to increase, as they help parties reconcile differing expectations about a company’s future performance, which becomes crucial in times of uncertainty.
• Joint and several liability for breach of business warranties was prevalent.
• A 24-month limitation period was the most used for business warranties.
• Excluding clean exits, the most used liability cap for business warranties was between 10% and 20% of the purchase price, leaving behind a trend of slightly higher percentages seen in recent years.
• In exits or SBO transactions, the private equity fund was either not held liable for breach of business or tax warranties, or its liability was notably low.
• Half of the SPAs that included an antisandbagging clause concerned only information that was "fairly disclosed".
• W&I insurance continued to be the most used buyer’s remedy in 2024.
• Arbitration proceedings were mostly managed by the International Court of Arbitration of the ICC.

Portugal: 2024 Market trends at a glance

• Forty percent of the deals Cuatrecasas advised on were transactions valued over €50 million.
• The life sciences and TMT sectors were the most active.
• The most common transaction continued to be the acquisition of 100% of a company’s share capital. However, deals where a fund took either a majority or minority stake were evenly split, each accounting for 27% of the transaction volume.
• Most transactions were bilateral negotiations. However, all deals over €100 million were carried out as auctions.
• Most deals included conditions precedent, primarily due to the need to obtain waivers from counterparties in material contracts.
• Completion accounts and locked-box pricing mechanisms were used equally.
• Net debt and working capital were the most widely used financial parameters for the post-closing adjustment.
• Despite the global uncertainty of 2023 and 2024, the use of earn-outs has decreased compared to previous years.
• The most common limitation periods for the seller’s warranties were 18 months and 2 years.
• In most transactions, the liability for business warranties was capped at 30% or less of the purchase price.
• Although most deals opted for antisandbagging clauses, they were typically limited to "fairly disclosed" information.
• Third-party guarantors and W&I insurance were the most used buyer’s remedies.
• Arbitration is the most common dispute resolution mechanism. Lisbon was the most commonly chosen seat of arbitration. All arbitration clauses referred to the rules of the Commercial Arbitration Center of the Portuguese Chamber of Commerce and Industry.