M&A Market Trends in Spain in 2024

Based on the analysis of the most important transactions Cuatrecasas has advised on, this study shows the M&A market trends in Spain in 2024.

We have advised on over 50 M&A transactions subject to Spanish law, with values exceeding €10 million, conducted through share purchase agreements within the scope of general M&A and private equity transactions.

2024 market trends at a glance

• Auctions. A slight increase is reflected in transactions negotiated within the framework of an auction. This sales process structure is the option chosen by the majority of private equity funds for their exits.
• Conditions precedent. Over half of the transactions had deferred signing and closing due to the inclusion of conditions precedent. If we consider only transactions above €100 million, the percentage is 100%. As is customary, the conditions precedent governing the agreements come in various forms. The following are noteworthy: (i) regulatory authorizations, particularly antitrust and to a lesser extent in FDI; (ii) those related to the signing, maintenance or termination of certain strategic contracts; and (iii) the provision of waivers for changes of control (e.g., of banks and suppliers).
• Pricing mechanisms. The locked-box mechanism was used more frequently than the price adjustment mechanism with closing accounts (44% of transactions v. 35% of transactions), especially in private equity deals, where it is the predominantly used mechanism. Among the transactions that opted for a locked box, 20% of them included an equity ticker (i.e., interest on the price between the locked-box date and the signing or closing date) or added interest to the leakage amount. Its usage increased compared to 2023. 
• Among the most common financial parameters used for the price adjustment, the most frequent were net debt and the reference to working capital (23% of the transactions used the debt as a parameter for the price adjustment, 10% used working capital, and 33% used both parameters). 
• Timing of payment. In more than half of cases, the parties agreed to an initial price and a deferred price. Among the cases involving deferred prices, 72% were earnouts, 16% combined a fixed deferred price with an earnout, and the remaining cases included a fixed deferred price. The parameter most widely used for calculating the earnout was EBIT and EBITDA, as well as the achievement of a specific milestone (e.g., the resolution of a dispute or the collection of a debt). 
• Seller’s liability cap. The liability cap for the business representations and warranties given by the seller in the different transactions varied considerably, but the vast majority (82%) were below 50% of the purchase price. With regard to the seller's liability for breach of fundamental warranties, as is customary, the vast majority of contracts establish a liability cap equal to the sales price or do not include any caps at all. 
• W&I insurance. Unlike private equity transactions where the use of W&I insurance is a common practice, the percentage decreases to 25% when considering all M&A transactions. All in all, in 2024, 60% of the transactions that opted for the use of insurance were M&A transactions in which a private equity fund was not involved, indicating that its use is also becoming widespread outside this sector. 
• Temporary limitation of the seller’s liability. The most common period for business representations and warranties was 24 months (42% of transactions) and 18 months (30% of transactions), with very similar figures to those of 2023. The limitation period applicable to the fundamental representations and warranties (both as to title and capacity), as well as tax, labor, and social security matters, is typically the statutory limitation period. Depending on the type of transaction and the sector, the extension of the limitation period to the statutory period was also seen in relation to representations and warranties of a criminal or administrative nature and, to a lesser degree, in those relating to intellectual property or data protection.
• Purchaser's knowledge. The vast majority of the agreements regulate the impact that the purchaser's knowledge has on the seller's liability. In 52% of cases, an anti-sandbagging clause was agreed upon, while in 27% of cases, a pro-sandbagging clause was agreed upon. Sometimes a mixed solution is agreed, whereby the purchaser's knowledge does not exclude the seller's liability in the case of third-party claims, but does exclude its liability in direct claims (4% of transactions). An increasing trend is that nearly half of the transactions that included an anti-sandbagging clause limit liability to the information fairly disclosed to the purchaser in the due diligence materials or otherwise. 
• Dispute resolution. The use of arbitration as a dispute resolution mechanism has declined. Jurisdiction was the option preferred by the parties in 77% of transactions. In transactions where arbitration was chosen, Madrid (primarily) or Barcelona were the venues selected in virtually all transactions. The forum selected in two-thirds of the cases was either the International Chamber of Commerce (ICC) (36%) or the Civil and Commercial Court of Arbitration (CIMA) (27%).