Opinion: Elena Boixados

Fifteen years of continual growth in the Spanish economy, largely driven by the construction industry came (metaphorically!) crashing to the ground when the economy entered recession in the last quarter of 2008. 2009 was not much better either, with the economy continuing to decrease, falling by over 3.6% compared to 2008.

Not surprisingly, the number of M&A deals decreased over this period too, with 19% less in the year to November 2009 compared to the same period of 2008, and the total number of M&A deals over €5 million during the first eleven months of 2009 standing at only 232.

Private equity investment also fell by 49% during the first semester of 2009, totalling €678 million. This is largely due to the decline in private equity deals above €10 million in value, which decreased from 26 deals (€962 million in value terms) in the first semester of 2008 to 14 (€400 million) in the same semester in 2009. The number of deals estimated within the range of €1-10 million was 81, 9 deals fewer than 2008, whilst even more starkly, there were no deals over €100 million during this period at all.

What do I see happening during 2010? I'm pretty sure that the only way is up, largely thanks to inward investment from those economies coming out of the recession before Spain, particularly given that Spain still has many financial problems to solve itself.

Moreover, Spanish companies are trading at low price to earnings ratios as the market discount the record revenues of the previous few years of growth, and bargains may be had.

With the country risk premium jumping to 8% (against the average between 1980 and 2004 of 5.3%), new trends may start in the Spanish M&A market as deals will nearly all be done without leverage.

Spanish based acquirers for overseas assets may still be there, although in much limited numbers than before, whilst its sheer size and proximity to the rest of Europe means it will remain attractive to investors in some sectors (construction most likely excluded!!).

In conclusion, 2010 won't be an easy year for Spanish M&A although I think the lowest point may have been reached.