Inflation first and interest rate hikes later have scrapped the market for mergers and acquisitions of companies, in which there is no lack of interest, but there is certainty to set the price of assets. This was, if nothing else, the trend during the past year, according to a report by the Bain consultancy
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The fall is greater than that recorded internationally, by 15%, to 3.2 trillion dollars, the lowest level in a decade. “The most strategic operations went down as buyers and sellers tried to close the gap in valuations,” the report concludes.
In addition, operations have suffered delays due to increases in interest rates and their more immediate consequences, which are the increase in debt and doubts about the ability of companies to respond to more financial pressure.
Instead, sovereign wealth funds took the opportunity to expand their international presence. In Spain, the Bain report highlights the purchase of the logistics group Noatum by AD Ports, from Abu Dhabi. It does not include, however, because it is the purchase of a minority stake, the investment of more than 2,000 million euros by Saudi Telecom in Telefónica.
During the year, only one large operation of more than 5,000 million euros was agreed in the country, consisting of the acquisition of Vodafone Spain’s business by the British firm Zegona. It was actually the move that prevented a sharp drop in transactions.
Other major operations were the purchase of Liberty Seguros by Generali, valued at 2.3 billion euros, and the X-Elio renewables group by the investment firm Brookfield, for around 1.8 billion euros.
Another different report, drawn up in this case by the consultancy TTR, cites the real estate sector as the most active in business operations last year, with 653 transactions. The biggest operation of the year in this activity was the purchase for 1.8 billion euros by the sovereign fund of Sinpagur, GIP, of 35% of the hotel platform HIP, owner of more than 70 hotels, a good part of which, in Spain.
Interest rate hikes mainly affected the investments of venture capital funds, which have been particularly active in recent years. Investment capital firms, which use contributions from investors and debt to buy companies, reduced their activity in Spain by 30%.
The Bain report includes a survey of 300 professionals and experts in mergers and acquisitions, who expect a recovery in the purchase and sale of companies. In several sectors, “a reduction in the valuation gap” is foreseeable, he says.
“For this year we expect more opportunities”, says Álvaro Pires, partner at Bain. “As interest rates stabilize, we expect the market to reactivate.”
