A practical guide to Spanish private M&A

Author: | Published: 25 Apr 2003
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Spanish private M&A deals, particularly those with a cross-border component, do not require professionals used to similar transactions in other markets to go on a steep learning curve. M&A practice has been steadily evolving over the last 15 years and negotiating an acquisition in Spain now involves the same due diligence, completion adjustment and warranty tools used elsewhere. But local practice does have its idiosyncrasies and investment bankers, foreign lawyers or corporate investors parachuted into the acquisition of a private company in Spain can benefit from a few tips from Spanish lawyers.

Regulatory aspects

Regulatory concerns generally come from three sources: golden share regulations, industry-specific restrictions, and merger control.

Think first of potential golden share rules. Several of the largest Spanish companies were privatized during the nineteen-nineties and the Spanish Government kept a golden share in some of them - in the form of a right to authorize or block acquisitions or disposals of shares held in, or assets owned by, such companies. Consider this issue: golden share restrictions may not only apply to the acquisition of company X, but also to the sale by company X of certain of its assets.

Always consider industry-specific rules. In spite of the large extent to which foreign investment has been liberalized, there are still industries where the nationality of the purchaser may imply the need for government approval. Defence is an example of this.

Mind the impact of merger control regulations. The acquisition of a Spanish business is seldom big enough to meet the thresholds that would make the deal subject to European Commission review. However, transactions falling below such thresholds are potentially subject to review by the Spanish competition authorities. Specifically, an acquisition without an EU dimension must be notified to and reviewed by local merger control authorities if it implies the creation or increase of a share of 25% or more of a specific market or if the aggregate turnover in Spain of the parties involved exceeds EUR 240.4 million ($257 million), with each of the purchaser's group and the target's group having a turnover of EUR 60.1 million. The notification triggers a 1-month procedure which may be extended to a total of 4 months. Notifiable transactions are generally signed subject to merger control approval, with filing being done just after signing and the deal completed once the approval is obtained. However, bear in mind that the Spanish merger control authorities have become increasingly demanding and more and more inclined to impose remedies in the form of restrictions or disposals - your condition precedent clause should be sophisticated enough to foresee all possible outcomes.

Pedro Pérez-Llorca

Pedro Pérez-Llorca joined Pérez-Llorca in 1996, having worked as an associate at another Spanish firm for four years.

He has been an assistant professor of commercial law at Francisco of Vitoria University (ICADE University) and has taught Financial Law at the Francisco de Vitoria University. He has also given lectures for the Madrid Bar Association on the financing of real estate transactions and issues and offerings of securities.

Pérez-Llorca specializes in corporate law, particularly M&A, private equity, banking and capital markets. In M&A, he has advised Spanish and international clients on major acquisitions, joint ventures and mergers. Within this field he has been particularly active in providing M&A and joint venture advice to clients in connection with the internet and technology industry. His work has covered due diligence, share issues and allocation, co-investment and shareholders' agreements in addition to management, technology transfer and other related agreements. He also has experience in customary post-acquisition or post-investment aspects such as the implementation of stock option plans for employees.

In capital markets Pérez-Llorca provides legal advice on all aspects, including equity, debt and hybrid products as well as public tender offers.

Law degree Universidad Nacional de Educación a Distancia (UNED) (Madrid).
Business and economics degree from Universidad Complutense de Madrid specializing in audit and finance.

English, Spanish, French, German and Italian.


Plunge into the negotiation of your share or asset purchase agreement and do not expect to see many changes in its structure compared to what you have used in other cross-border transactions. The shape may differ from what you have seen elsewhere, but the contents should not. The agreement will establish what you are buying and the price you would pay, provide for separate signing and completion where conditions precedent need to be fulfilled, foresee the preparation of completion accounts and a completion adjustment, and include a set of representations and warranties given by the seller.

You may be told that completion adjustments are not day-to-day practice in Spain - do not believe it, they are. Do not take your seller seriously when he tells you that you should satisfy yourself with due diligence - he knows you should not. Net asset adjustments are common, but so are working capital and net cash/debt adjustments or more sophisticated ones based on industry-specific ratios. Be demanding, you will be understood.

When you come to the warranties, you may hear allegations that this is a civil law jurisdiction (true) that includes a system of implied warranties (true) giving reasonable protection to the buyer of a business (false) and making long lists of representations unnecessary (false). The market is fully familiar with English-style reps and warranties and you should use them as elsewhere.

Taking security covering completion adjustments and breach of warranty is important - this is a combative country and a friendly settlement on these matters is more likely to be reached if the money has been placed in no man's land. You may put in place an escrow deposit, but you are likely to find little sympathy with the idea. If so, suggest a bank guarantee as an alternative, it will be better understood, easier to negotiate, cost less and probably work better. However, remember to ask your lawyers how it works in practice and ensure you are satisfied with it. Remember this is a civil law system and the bank may have grounds to refuse payments based on the Civil Code, even if not expressly referred to in the guarantee letter. As a general rule, always require that it should be first demand.

Finally, give some importance to the dispute resolution clause. The seller will kindly suggest that disputes should be resolved by the Spanish Courts. You may want to decline that offer and suggest international or domestic arbitration, which may work out better for you. There is nothing wrong with the Spanish Courts, but as in other jurisdictions they tend to require that all documents be in the local language, may be slower than you need and their rulings are often subject to two appeals. However, if you choose international arbitration, make sure you elect a system that reduces the possibilities of appeal rather than the reverse. Beware of Paris!


If you are not comfortable with the legal documentation being in Spanish, request that the agreements are negotiated and executed in English - this will require an additional effort on the part of the Spanish-speaking team, but will be accepted. If you can avoid having a Spanish translation, you will also avoid inconsistencies between the two versions. Generally, there is no rule insisting that legal documents have to be in Spanish - as a matter of fact, it is quite common that they are in English in cross-border M&A. Only in some cases (such as property conveyancing) will you really need to execute at least part of the legal documentation in Spanish.

Finally, your lawyer will tell you that the completion documentation must (or should preferably) be signed before a notary. Although this may be an unnecessary formality where you come from, trust your lawyer, this is standard practice and may be legally required or practically necessary (for instance, to resell). There are many notaries who will accept your documents in English and be a real help on completion. Make the right choice.