M&A as an exit strategy

Family-owned businesses are a significant component of Spain's economic landscape, and many are now facing critical succession planning issues. According to recent figures from the Spanish statistics bureau (Instituto Nacional de Estadística), the country’s ageing index increased to more than 137% in 2023. This means there are 137 people aged 65 or older for every 100 young people under the age of 16, up from nearly 134% in 2022.

This demographic shift has several implications for the mid-market M&A sector. As business owners age and approach retirement, the urgency for effective succession planning intensifies. Without adequate planning, some businesses might face the risk of closure. This creates opportunities for mergers and acquisitions as these companies search for buyers who can sustain and grow their operations​.

“We help family businesses plan for their future, either by finding a partner to support the next generation or an investor to take 100% of the capital. We seek solutions where everyone benefits, allowing for asset diversification, ensuring business continuity, and creating winning projects.” says Javier Navarro, M&A associate at global financial advisory firm Vinca Capital in Spain. 

Acquiring businesses with operational improvement potential, lacking professional management, and without international presence allows for the transformation of local companies into high-performing businesses through the implementation of a solid strategy. “As older business owners look to retire or exit, the absence of clear succession strategies means that many of these companies will likely seek buyers or merge with other entities, creating a large pool of potential M&A opportunities,” explains Navarro.

IT, AI, and traditional industries

One of the main drivers of M&A growth in Spain has been the technology sector. Private equity funds are increasingly interested in acquiring technologically disruptive companies (with an AI component) to drive innovation and competitiveness in a highly digitalised global market. Additionally, foreign investment in Spanish technology companies has increased, reflecting confidence in the country's tech ecosystem. In 2023, it was the second most significant sector for M&A in Spain, accounting for nearly 15% of total corporate transactions. Additionally, traditional sectors such as horticulture, packaging, food, and retail have undergone a strong consolidation process that will continue in the coming years. We are witnessing intense M&A activity as funds strive to consolidate their market presence and increase operational efficiency. Mergers and acquisitions in these sectors have been driven by the pursuit of synergies and economies of scale, as well as the need to adapt to a changing and highly competitive business environment.

A positive market backdrop

Following a notably quiet 2023, Vinca Capital expects a significant increase in Spanish M&A transaction activity this year. As well as the domestic environment mentioned above, two key macro drivers are also behind this positive outlook:

1. Market recovery: The Spanish M&A market is gradually recovering from the slowdown experienced in 2023. This recovery is expected to accelerate as economic conditions stabilise and investor confidence improves.
2. Interest rate cuts: Expected cuts in interest rates during the second half of 2024 will make financing more affordable for buyers. Lower borrowing costs should encourage more companies and investors to pursue acquisitions, further boosting transaction volumes.

Strategic positioning

These trends highlight the importance of strategic positioning with an international lens. Over the 20 years since its inception, Valencia-based firm Vinca Capital has helped its clients uncover and understand these market opportunities to find the right fit for their needs, covering all aspects of their M&A transaction from corporate finance and strategic advice to alternative investment. This requires extensive knowledge of the domestic market and the intricacies of SME and family business structures as well as a robust international network.  

“Dealsuite allows us to access a deep, global pool of qualified buy and sell side partners, communicate deal mandates, and keep abreast of daily deal flow.” Says Javier. The platform’s intelligent matching algorithm also facilitates detailed counterparty research, which is key when the goal is to acquire a foreign target operating within a specific industry.

Get in touch with Vinca Capital team through Dealsuite here. 

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