Public mergers and acquisitions in Spain: overview
A Q&A guide to public mergers and acquisitions law in Spain.
The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; transfer taxes; other regulatory requirements and restrictions; as well as any proposals for reform.
To compare answers across multiple jurisdictions, visit the Country Q&A tool Country Q&A tool.
This Q&A is part of the global guide to public mergers and acquisitions. For a full list of jurisdictional Q&As visit www.practicallaw.com/acquisitions-guide.
The upward trend that began in 2014 continued throughout 2015, with Spain experiencing the highest economic growth in Europe. The depreciation of the Euro, a decline in oil prices, the gradual decline in unemployment and the current environment of low interest rates created a climate of confidence for both Spanish and foreign investors. Experts signal that the outlook for M&A markets is positive and that they expect 2016 to be an active year.
However, Spain is currently experiencing a period of institutional instability and this may affect the interest of potential investors. As long as Spain can recover its institutional stability, without any threats to the emerging trend of economic recovery, the market conditions are expected to be favourable and for this upward trend to continue.
The total number of M&A transactions in 2015 represents the second highest number of deals since 2007. In 2015 there were 1,467 closed deals, compared to 1,205 in 2014, an increase of 21.7%. In terms of volume these transactions were worth EUR123 billion in 2015 compared to EUR71 billion in 2014, an increase of 58%.
2015 was distinctive in that it saw a very important transaction: the partial privatisation of AENA. In January 2015, AENA completed the most important initial public offering (IPO) in years, with an enterprise value of around EUR20 billion and an offer of around EUR4.5 billion. A good number of IPOs followed AENA, confirming that activity in 2016 has been reactivated.
In addition to capital markets, the energy sector has been very active and saw the:
Acquisition of the E.ON business in Spain by Macquarie for EUR2.5 billion.
Acquisition of Eolia by Oaktree.
Other active areas include:
Real estate (444 deals closed).
Technology (222 deals closed).
Finance and insurance (162 deals closed).
According to Spanish law, obtaining control of a public company entails:
The direct or indirect acquisition of 30% or more of the voting rights.
Holding less than 30% of the voting rights, but appointing more than half of the members of the board of directors in the public company.
The main ways to obtain control of a public company in Spain include:
Acquiring shares or other securities that directly or indirectly hold voting rights in the public company.
Through agreements (pactos parasociales) with other shareholders.
Through indirect or unexpected takeovers, as a consequence of:
the merger or takeover of another company or entity which holds direct or indirect interests in a third-party public company;
a share capital decrease in a public company;
the acquisition of shares derived from the acquisition, or the conversion or subscription of other financial instruments;
changes to the treasury stock of a listed company; or
any financial institutions or any other person obtaining at least 30% of voting rights in fulfilment of a commitment to underwrite a public offer to transfer the securities of a listed company.
Hostile bids are permitted under Spanish law but are rare.
A target's board of directors is subject to a duty of passivity (deber de pasividad) in relation to a bid, but it is unusual to find offers that are not supported by the board. In the majority of cases, whenever a bid is rejected by the target's board of directors, the bid will usually fail.
The duty of passivity has certain limits and does not prevent the target's board of directors from trying to beat the bidder by, for example:
Searching for a competing offer.
Issuing a report stating that is against the takeover bid (which can significantly influence the decision of the target's shareholders).
Regulation and regulatory bodies
Public takeover bids are governed by the Spanish Securities Market Act, as amended by Act 4/2015, and further developed by Royal Decree 1066/2007 of 27 July on the rules applicable to takeover bids for securities.
The primary regulator and supervisor of public takeovers and mergers is the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) (CNMV).
If the transaction is subject to merger control clearance, the primary regulators are the local Spanish or the EU anti-trust authorities. According to the particular features of the deal, this can be either the:
Spanish National Commission on Markets and Competition (Comisión Nacional de los Mercados y de la Competencia) (CNMC).
If the target operates in a regulated sector such as finance, insurance, energy or telecommunications, the relevant governmental authorities or agencies are as follows:
For the finance sector: the Bank of Spain and the CNMV.
For the insurance sector: the General Directorate of Insurance and Pension Funds.
For the energy sector: the CNMC and the Ministry of Industry, Energy and Tourism.
For the telecommunications sector: the CNMC.
Due diligence in public M&A transactions is less frequent than in private M&A deals. The process is usually conducted through a high-level and limited review, focusing on key matters. Timing is also crucial when carrying out due diligence. The areas subject to review can vary depending on each case (from financial to business or legal) and focus on information reasonably requested by the bidder to confirm its price estimations, strategic fit, risks, adequacy of management, change of control or regulatory issues, as well as the appropriateness of the bidder's financing structure.
Confidentiality agreements are needed to carry out due diligence. These allow the target to ensure that the information disclosed (to both the original bidder and any competing bidders) is used only for the purposes of a takeover bid. Furthermore, in accordance with the equal information requirement, when a bidder receives insider trading information it must disclose that information in the bid prospectus, mentioning generally the areas covered and the main conclusions of the due diligence.
When a target and a bidder sign an agreement to start a due diligence process, this generates an asymmetry of information for any potential competing bidders. Royal Decree 1066/2007 establishes that equal information must be available to competing bidders. For this reason, certain information relating to the target must be made available when it:
Has been specifically requested by the bidder or the potential bidders.
Has previously been provided to another existing or potential bidder.
Is necessary to launch the bid.
Public companies must make available to the market any information that could reasonably affect shareholders or investors when acquiring or selling securities in the target.
However, during a takeover bid process, and in order to protect the target and the value of its shares, it is market practice to include a "blackout clause". This clause is established when certain insider information is not disclosed during the takeover bid process. In blackout periods, insiders (directors, consultants and persons connected to them) are limited when selling or buying the target's shares, preventing insiders from participating in insider trading.
It is also necessary to prepare a list of insiders. This list will include the names of all the people who have access to inside information and the dates on which they have access to it. This record must be given to the Spanish Securities Market Commission on request.
Under the current Spanish law, there are no rules on maintaining secrecy until the bid is public. To avoid market disruption, the Spanish Securities Market Commission normally requires the parties involved in a potential bid to make a public announcement regarding the bid when rumours or speculation may disrupt the market conditions.
Agreements with shareholders
It is very common for the bidder and the controlling shareholder of the target to enter into pre-bid agreements. These kinds of agreements usually result in irrevocable commitments where the bidder launches a takeover bid and the other party (the selling shareholder) accepts the offer. Due to their importance for shareholders when making a decision on whether or not to accept the offer, irrevocable commitments must be disclosed in the bid prospectus.
Irrevocable commitments are not expressly regulated under Spanish law. Pre-bid agreements that only include irrevocable commitments are not considered to trigger the obligation to launch a mandatory takeover bid if the conditions to which the voluntary offer was subject are not met.
The Spanish Securities Market Commission (CNMV) is critical of irrevocable commitments because they can deter competing offers. In some cases, the CNMV encourages the imposition of certain conditions, such as opt-out clauses, which allow the selling shareholders, under certain circumstances (for example, if a competing offer has been launched), to be able to reject the original offer.
When a shareholder acquires or transfers shares or other securities that grant (directly or indirectly) voting rights in a public company and consequently its stake in the public company reaches or falls below the following thresholds, the relevant shareholders must disclose this to both the target and the Spanish Securities Market Commission (CNMV): 3%, 5% and successive multiples of 5% up to 50%, 60%, 70%, 75%, 80%, and 90% of the company's total voting rights.
In the context of a takeover bid, the following transactions must be publicly disclosed:
Any purchase of shares or securities reaching or exceeding 1% of the target's voting rights.
Any increase or decrease in stakes that constitute 3% or more of the voting rights in the target.
In the context of a takeover bid, the bidder (or persons acting in concert with them) must inform the CNMV of any acquisitions of target shares made outside the takeover bid procedure.
Agreements in recommended bids
In public M&A transactions it is common to have agreements between the target and a potential bidder. The main issues covered by these kinds of agreements include:
Exclusivity undertakings by the target (agreeing not to negotiate with any other potential bidders).
"Standstill" clauses (a commitment by the bidder not to purchase shares in the target for a limited period of time in order to not disrupt the value of the shares).
Bidding exclusivity agreements with time limits are common in public M&A transactions. In addition, because of the duty of passivity of the target's board, it cannot enact defensive measures against unsolicited takeover bids unless it has obtained prior approval from the shareholders' meeting (see Question 23).
It is common for the target company to agree to pay the first bidder a break fee as compensation for the costs incurred in preparing the bid.
However, these break fees are usually subject to the following conditions:
Break fees can only be paid to the first bidder.
The amount of the break fee cannot exceed 1% of the total amount of the bid.
The board of directors of the target must approve the break fee based on a report issued by its financial advisers which justifies the break fee.
The bid prospectus must contain information detailing the break fee.
In private M&A transactions, it is common for the bidder to be required by the seller to obtain financing before the transaction. However, this kind of requirement is not permitted in the context of a public takeover bid because the bidder must inform the Spanish Securities Market Commission (CNMV) of how it will finance an offer.
Alternatively, the bidder can provide a bank guarantee covering the total amount of the consideration, in lieu of disclosing any financing details to the CNMV.
Announcing and making the offer
Making the bid public
The timetable of how and when a bid is made public depends on the class of bid:
Mandatory takeover bids must be made public immediately after the triggering event (which typically exceeds the threshold of 30% of the voting rights of the target company) and always within one month of the triggering event.
Voluntary bids must be made public as soon as the board of directors of the bidder agrees to launch the bid, provided that the bidder has undertaken the financing or taken reasonable steps to ensure the consideration offered.
In both cases, the bid must be announced through the Spanish Securities Market Commission's (CNMV) website. Once the bid has been announced, the bidder must file the bid prospectus within one month.
Royal Decree 1066/2007 and the regulatory authorities establish a timetable framework for the bidder and the target company to make disclosures and satisfy conditions in a takeover bid process.
The following key dates are milestones in the takeover bid tentative calendar, which includes the negotiation process prior to the bid announcement by the potential bidder (Day):
Day minus 28. Indication of interest by the bidder and execution of a Non-Disclosure Agreement (NDA).
Day minus 21. Due Diligence process (about three weeks).
Day minus 2. Negotiation of the share purchase agreement and irrevocable commitments (about one month).
Day minus 1. Execution of the share purchase agreement and irrevocable commitments.
Day 0. Resolution of the bidder's board of directors in order to launch the takeover bid.
Day 1. Announcement prior to the takeover bid.
Day 31. This is the maximum term for filing the takeover bid authorisation request, together with the bid prospectus, bank guarantee and any other complementary documentation (one month from the filing of the announcement, or one month and seven additional business days for the bank guarantee and any other complementary documentation).
Day 38. The offer is admitted to be reviewed by the CNMV.
Day 102. Takeover bid authorisation by the CNMV (about three months from the filing of the authorisation request).
Day 107. Publication by the bidder of the authorised bid in the Bulletin of Quotations and in at least one national newspaper.
Day 108. Start of the acceptance period which must remain open for a minimum of 15 calendar days and a maximum of 70 calendar days, as chosen by the bidder.
Day 123. Expiration of the acceptance period (assuming the minimum term of 15 calendar days).
Day 128. Notification to the CNMV of the number of acceptances.
Day 130. Issuance by the CNMV of the decision as to whether the bid has had a positive or negative result.
Day 133. In the case of bids that offer a cash-only consideration, the offer must be settled within three business days of the publication of the result of the bid. In the case of bids that offer a non-cash consideration, the bid must be settled as provided for in the prospectus. Payment by the bidder takes place on the settlement date of the transaction.
Mandatory bids must not be subject to any kind of pre-condition, save for clearance from the anti-trust authorities.
Voluntary takeover bids can be subject to certain conditions to be verified at the end of the bid's acceptance period. In particular, the following conditions are admitted:
Approval of amendments to the articles of association, corporate restructurings (such as mergers or split-offs) or the adoption by the shareholders of other resolutions at the general shareholder's meetings.
A minimum threshold for acceptance of the target's securities (normally 75% of the voting share capital, which ensures effective control of the company and is the threshold for tax consolidation purposes).
Approval of the takeover bid at the target's general shareholders' meeting. This facilitates the launching of any bids by foreign companies that are required by their jurisdiction to obtain prior authorisation from the target's general shareholders' meeting.
The target's shareholders receive the following documents on a recommended and hostile bid:
The informative prospectus that contains all of the relevant information on the bid. The bidder is responsible for this document.
The report from the target's board of directors containing the opinion of the members of the board on the reasonableness of the takeover bid.
When a takeover bid is made public, both the target's board of directors and the bidder must inform the representatives of their respective employees, or in the absence of any employee representatives, the employees themselves.
Additionally, when the bidder's prospectus is published, both the target's board of directors and the bidder must deliver it to the representatives of their respective employees, or in the absence of any employee representatives, to the employees themselves. As a general rule, employees should be able to quickly and easily access the bid information.
Cash is the most common form of consideration offered on a public takeover bid. In the context of mandatory bids, cash as consideration is legally required. However, there are a number of precedents in which the consideration is structured as an exchange of shares or securities. In particular, this form of consideration is used in transactions with a high acquisition value.
Consideration can also consist of a combination of cash and securities.
In the following cases, the offer must include an alternative consideration in cash, which is at least financially equivalent to the value of the exchange offered:
When the potential bidder (or the persons with whom they are acting in concert) has acquired shares in the target company in cash during the 12 months before the formal offer.
When control (direct, indirect or unexpected) of the target has been achieved by way of a mandatory bid.
There are specific regulations that provide for a minimum level of consideration and these regulations vary depending on whether the takeover bid is mandatory or voluntary.
In the context of mandatory takeover bids, Spanish regulations have introduced the concept of an "equitable price". If control of the target is obtained, the bidder must offer an equitable price for its shares. This equitable price must be equal to or higher than the highest price that the bidder (or persons acting on their behalf) has paid, or agreed to pay, for the same shares during the 12 months before the announcement of the offer. Where the bidder has not entered into any agreements or made any acquisitions during this time, the consideration offered must be equal to or higher than the price calculated in the de-listing report (see Question 22).
In addition, in the context of mandatory bids, the Spanish Securities Market Commission (CNMV) can adjust the price if the bidder does not offer an equitable price.
In the context of voluntary bids, it is not necessary to offer an equitable price but the CNMV can make the bidder state in the prospectus that the price offered is not equitable.
Compulsory purchase of minority shareholdings
A bidder is allowed to compulsorily purchase the shares of the remaining minority shareholders under certain circumstances. In particular, a bidder that has launched a takeover bid for all the shares in the target without achieving 100% acceptance is entitled to exercise its "squeeze-out" right. This right enables the bidder to compulsorily purchase all the remaining shares at the same price as the initial offer. However, in order to protect the interests of the minority shareholders, they are entitled under the same conditions to force the bidder to compulsorily purchase their shares or securities. This right is known as a "sell-out right".
Both of the following conditions must be met to be able exercise these rights:
The bidder must obtain at least 90% of the voting share capital in the target company.
The bid must have been agreed to by the shareholders representing at least 90% of the voting rights to which the bid was addressed.
Restrictions on new offers
There are no restrictions preventing the bidder from launching a new offer when it fails to obtain control of the target. A bidder is entitled to amend the conditions of the initial offer, provided that this is carried out before the last five calendar days of the acceptance period. Any amendments to the offer usually suggest a more favourable level of acceptance.
A mandatory takeover bid must be launched in order to de-list a company.
However, there are a number of exceptions to this. A company can also be de-listed:
As a consequence of a takeover bid, a bidder becomes the holder of 100% of the target's share capital and, subsequently, the bidder exercises its squeeze-out right or the minority shareholders exercise their sell-out right.
When all the shareholders unanimously agree to de-list their shares, waiving their right to sell the shares under the applicable takeover bid rules.
As a result of a corporate transaction, the shareholders of the de-listed company became the shareholders of another listed company.
A takeover bid has previously been launched for the entire capital, provided that the prospectus contains the intention to de-list all of the shares of the target and that the sale of the shares is facilitated through a permanent purchase order at the same price as the former offer.
Although a target's board has a duty of passivity in relation to the bid, it is allowed to take certain actions to defend a hostile bid. In particular, the board can search for a competing bidder or state in the report that it is against the bid. This report has important influence on the decisions made by the target's shareholders.
Other regulatory restrictions
Depending on the sector in which the target company operates, it may be necessary to obtain certain regulatory approvals. For example, when the target operates in the banking or telecom sectors, the bidder may be required to obtain approval for the bid. In these cases, the bid can be launched without the required approval but the Spanish Securities Market Commission (CNMV) will not authorise it until regulatory approval is obtained. Therefore, the acceptance period will not begin until evidence of the approval is disclosed to the CNMV.
It is not common to find restrictions on foreign investment in Spain.
However, there are still some sectors where foreign investment can be restricted, mainly when related to public order (such as national defence, national security, public health or airline carriers). Any foreign investment in these sectors must be reported to the General Directorate for Trade and Investment for statistical, financial and administrative purposes.
The regulatory authorities
Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) (CNMV)
Main area of responsibility. The primary regulator and supervisor of public takeovers and mergers.
Spanish National Commission on Markets and Competition (Comisión Nacional de los Mercados y la Competencia) (CNMC)
Main area of responsibility. The national regulator for anti-trust and telecommunications.
Banco de España
Main area of responsibility. The national regulator for finance.
Dirección General de Seguros y Fondos de Pensiones
Main area of responsibility. The national regulator for insurance.
Ministerio de Industria, Energía y Turismo
Main area of responsibility. The national regulator for energy.
Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) (CNMV)
Description. The CNMV offers up-to-date relevant information on the status of the Spanish Stock Exchanges. Moreover, the public CNMV registry contains all of the relevant information that must be disclosed related to takeover bid processes that fulfil the equal information requirements.
Julio Lujambio, Partner
Professional qualifications. Dual-qualified lawyer, Spain and Mexico
Areas of practice. Corporate/M&A; capital markets; private equity.
Non-professional qualifications., Degree in Law, Spain, 2004; Master's degree in Business Law, Instituto de Empresa (IE), Madrid, Spain, 2003; 2002, Degree in Law, Universidad Panamericana. Mexico.
- Advising on sale of several of Johnson & Johnson's business units to different industrial and financial purchasers.
- Advising on joint venture between E.ON Renewable Energies and Abengoa Solar for the development, financing and construction of two thermo-solar plants in Spain.
- Advising on the acquisition by Gas Natural of 50% of the renewable assets from EUFER, a joint venture company of Gas Natural and Enel.
- Acting for AENA on it dual-track for (M&A to select cornerstone investors and IPO).
- Representing Volotea on its IPO (ongoing).
- Advising Volotea on its convertible bond, the size of a third of its share capital (ongoing).
- Representing Cortefiel on its IPO (ongoing).
Languages. Spanish, English
Professional associations/memberships. The Madrid Bar Association.
Guillermo Fernández-Daza, Senior Associate
Professional qualifications. Lawyer, Spain
Areas of practice. Corporate/M&A; capital markets; private equity.
Non-professional qualifications. Degree in Business Administration, Universidad Pontificia de Comillasm, Madrid, Spain, 2010; Degree in Law, Universidad Pontificia de Comillas, Madrid, Spain, 2009
- Advising on integration of the European bottling businesses of Coca-Cola Enterprises, the Coca-Cola Company and Coca-Cola Iberian Partners, and listing of the resulting entity (Coca Cola European Partners) (ongoing).
- Assisting on the sale by E.ON of all its assets in Spain and Portugal to an investment vehicle which Macquarie Infrastructure and Wren House Infrastructure have stakes in.
- Representing Sell-IT APP on its investment in the share capital of Wallapop.
- Advising FMS Wertmanagement, together with Deutsche Pfandbriefbank, and in co-operation with Perella, on the acquisition of two of the largest factory outlet centres in Spain.
- Advising on the investments of the venture capital and private equity funds Redpoint Ventures, Pinnacle Ventures, General Catalyst, Thrive Capital Partners, Serendipity Investments, Marpablo Investments, Global Classifieds LLC and IG Expansión in several on-line businesses in Latin America (Viajanet, Shoes4you, Joia).
Languages. Spanish and English
Professional associations/memberships. The Madrid Bar Association