Spain: M&A legislation in review

Author: | Published: 1 Jun 2009
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The legal framework of M&A activity in Spain is made up of (i) the provisions on general agreements, purchase agreements and assignment of receivables and payables in the Civil Code and the Commercial Code; (ii) the provisions contained in both the Public Companies (sociedades anónimas) and the Private Limited Liability Companies (sociedades de responsabilidad limitada) Laws, as well as the Regulation of the Commercial Registry and, as from July 4 2009, also the Law on structural modifications of commercial companies; (iii) the provisions on takeover bids in the Securities Market Law and the Royal Decree on Takeover Bids, applying to listed companies; and (iv) the provisions on merger control in the Defence of Competition Law, as well as those contained in the EU Merger Control Regulation.

Several other laws and regulations might apply too, and have an impact on, specific M&A transactions. For example: mergers, demergers, asset purchases or specific business combinations can be affected by the rules contained in the Statute of Workers or in the Bankruptcy Law. In addition, specific sector regulations should be considered if the companies taking part in the transaction operate in a regulated sector.

Legislative changes

The most important recent legislative changes affecting M&A in Spain have been brought about by Law 3/2009 of April 3 2009 on structural modifications of commercial companies.

Through Law 3/2009, Spain has implemented two directives: (i) Directive 2005/56/EC of the European Parliament and Council, dated October 26 2005, concerning cross-border mergers of capital companies, and (ii) Directive 2006/68/EC of the European Parliament and Council, dated September 6 2006, amending Council Directive 77/91/EEC as regards the formation of public limited liability companies and the maintenance and alteration of their share capital.

The main purpose of this new regime is to regulate in detail, and in a single legal body, the applicable requirements and procedures of certain corporate transactions which affect the corporate structure of companies, such as mergers, de-mergers, spin-offs, global assignments of assets and liabilities in favour of shareholders, and transformations in the type of legal entity. Specific mention should also be made of the regulation on cross-border mergers between companies belonging to the EU.

Generally speaking, the entry into force of Law 3/2009 is regarded as a positive and practical measure by those who take part in the M&A market because its purpose is to clarify, and in some circumstances, reduce or make more flexible the necessary steps and procedural requirements for implementing the different types of structural modifications affecting companies.

However, most of these new rules will not enter into force until July 4 2009, so it is not yet possible to pass an opinion on their impact on the amount of M&A transactions.


After a record-breaking year in 2007, the volume of M&A transactions carried out in Spain suffered a tremendous set back. According to independent analysts, M&A activity in Spain during 2008 decreased by 30 to 40% compared with 2007.

This reduction in M&A activity is clearly a consequence of the financial crisis that the global market is currently experiencing. In a situation similar to that of the mortgage market, corporate credits have suffered a decrease in both offer and demand. The banking system has had difficulties in raising funds and has therefore been restricting its credit to corporations. According to the Bank of Spain, credit margins have increased, and the banks are now requesting more secure guarantees from companies looking for financing.

Last year, the largest transaction in Spain was the acquisition of Unión Fenosa by Gas Natural. This transaction started in July 2008 with an agreement for the acquisition by Gas Natural of a 45.3% stake held by ACS in Unión Fenosa, and was recently completed in 2009 through a successful takeover bid of Unión Fenosa by Gas Natural. The total value of the deal exceeded €17 billion.

Another M&A transaction was the acquisition by E.ON in June 2008 of (i) Endesa Europa, a holding company representing the European arm of the Spanish utility company Endesa (which included several assets in France, Italy, Poland and Turkey); (ii) two power plants located in Spain; and (iii) 100% of the shares held by the Italian utility company Enel in three Spanish subsidiaries then called Enel Viesgo Generación, Enel Viesgo Servicios and Electra de Viesgo Distribución. The transaction totalled €11.5 billion.

Largely due to these two deals, M&A transactions related to the energy sector accounted for more than 50% of the total value of M&A transactions carried out in Spain during 2008.

The real estate area has been one of the worst affected sectors of the Spanish economy. However, at the beginning of 2008, the Spanish company Grupo Rayet Promoción y Landscape merged with the Spanish real estate company Astroc, giving rise to a combined corporation (Afirma Grupo Inmobiliario) with assets valued at more than €3.5 billion.

In the media sector, during 2008, Prisa settled its takeover bid for the remaining shares of Sogecable. This transaction exceeded €1.8 billion. Moreover, Grupo Planeta, the leading book publisher in Spain, acquired Editis, a French corporation specialising in school books. With this acquisition, Grupo Planeta entered the French market and has become a leading player in the European market. The value of that transaction was over €1 billion.

Finally, further to the takeover bid launched by Imperial Tobacco Group for the Spanish tobacco supplier Altadis back in 2007, which was settled at the beginning of 2008, Altadis launched a takeover bid of Logista in February 2008, which was successfully settled in May 2008 for a total value of more than €940 million.

As far as 2009 is concerned, some analysts expected a rally in M&A transactions, mostly from foreign investors who were waiting for the economic crisis to settle down in 2008. Such expectations have proven to be fairly unrealistic so far, since the economic crisis has worsened during the first quarter of 2009.

Foreign involvement

As a general rule, M&A transactions with a foreign involvement are not subject to any substantial restrictions in Spain.

Some specific sectors traditionally subject to restrictions, such as energy, transport, insurance, finance and telecommunications (not including television) have been totally or partially deregulated. The government keeps certain supervisory or veto powers in order to secure general public interest in these strategic sectors, but these powers apply regardless of whether there is a foreign involvement in the transaction or not.

However, there are still sectors, such as those related to national defence or explosives, where foreign involvement is restricted, on the basis of national interests.


Concerning private M&A transactions, there are no specific disclosure requirements other than those resulting from the corporate procedures for mergers and demergers. Pursuant to those procedures, which generally involve a resolution by the shareholders of the relevant companies, certain information on the proposed transaction must be made available to their shareholders, employees and creditors.

In a public takeover bid for a listed company the bidder is obliged to file a prospectus with the Comision Nacional del Mercado De Valores (CNMV), which should include extensive information on the following areas.

Information about the bidder and the target company, including the group structure of the bidder, a list of securities in the target company held by the bidder or its group, any agreements in force between the members of the board of the target company, the bidder and any advantages proposed by the bidder to these members, and accounting and financial information of the bidder and its group.

Information about the securities affected by the offer, the consideration offered, the maximum number of securities to which the offer is extended, and the type and amount of the guarantees granted by the bidder to ensure completion of the transaction.

Information about the formal aspects of the offer including term and formalities for the acceptance and expenses arising from the acceptance or settlement of the offer.

Information about the purpose of the acquisition and future intentions of the bidder in relation to the business, employees, assets and indebtedness of the target company, including whether the bidder intends to exercise the squeeze-out right.

Other information, including details of any required regulatory or merger control authorisations or clearances in relation to the transaction.

The prospectus must also include any further information that the CNMV considers appropriate. The prospectus must be filed with the CNMV and a substantial summary must be published in official gazettes and in the general press.

In addition to the above, a listed company involved in an M&A transaction or a business combination, must also disclose its involvement to the public by means of a relevant fact notice when it is likely to have a material effect on the quotation of the company's shares. Listed companies are also obliged to disclose the structure of their shareholding and corporate governance. Likewise, shareholders' agreements concerning listed companies must be publicly disclosed.

Finally, the takeover bid regulation establishes the obligation of the target company to guarantee equal treatment in terms of information amongst bidders or potential bidders, whereby the target company, when specifically required to do so by a bidder or potential bidder, is obliged to disclose to them any information concerning the target company that has been made available to another bidder or potential bidder. The target company is not obliged to provide information to any bidder, but it may be forced to do so if it provides information to a friendly bidder or potential bidder, and another bidder asks for the same information.

The various disclosure requirements applicable to or related to Spanish-listed companies (takeover bids and public offer prospectuses, relevant facts affecting the company's quotation, large shareholdings, corporate governance, related-party transactions and annual, half-year and quarter financial information) result in a high degree of market transparency, comparable to that of the other principal EU countries. This is especially true after the implementation in 2007 of the European directive on transparency, which contributes to the harmonisation of transparency regulation across the EU.

In a takeover bid, the CNMV analyses the prospectus and only after it has decided that the prospectus complies with law will it authorise the bid. The bidder's directors could be held liable if the information included in the prospectus is false, inaccurate or incomplete.

This directors' liability can appear mainly in the form of administrative or civil liability. The administrative liability is based on the provisions of the Spanish Securities Market Law. Directors that incur this type of liability may face a monetary penalty and may also be disqualified from the office of director. Civil liability is regulated by the Spanish Public Companies Law and the Civil Code and may lead to compensation for court-assessed damages.

Additionally, it is feasible to sue a company for the inaccuracy of the information contained in the prospectus. However, there is no experience in Spain of lawsuits based on prospectus liability.

Mac clauses

In contrast to what is common practice in finance, material adverse change (Mac) clauses are not commonly used in M&A transactions. It is only in private equity practice that a trend is emerging of incorporating Mac clauses in agreements.

The Spanish Civil Code does not regulate how unforeseen circumstances influence contractual relationships. The Spanish Supreme Court has drawn up the rebus sic stantibus doctrine which entitles a party to terminate an agreement if extraordinary circumstances change the object or purpose of the contractual relationship. However, this doctrine is strictly and narrowly applied by the courts and is mostly intended for long-term contractual relationships.

Lastly, the takeover-bid regulations do not permit Mac clauses to be included in mandatory public tender offers.

Traditionally, there were some doubts regarding the possibility of a listed company being able to provide non-public information to potential purchasers within the framework of an M&A transaction. These doubts have been largely resolved by the CNMV, by means of a recent notice that provides for the conditions under which inside information on listed companies may be delivered to third parties.

No other major issues remain unresolved in the field of M&A. However, the application of the new law on structural modifications of commercial companies, which will enter into force on July 4 2009 and will introduce important changes in the procedures for carrying out corporate transactions, is likely to give rise to legal uncertainties.


The Securities Market Law and Royal Decree 1066/2007 lay down the legal framework that governs takeover bids in Spain.

The main regulatory body supervising takeover bids is the CNMV. If the takeover meets merger control thresholds, the Competition Service must also be involved. Likewise, if the target company operates in a regulated sector (for example in insurance or energy), the involvement of the competent independent authority is required.

A takeover can be achieved by means of a takeover bid, a merger or demerger, an assignment, or a purchase of assets. A takeover can also result from a bankruptcy procedure.

The new takeover regulations make no distinction between friendly and hostile bids. However, in the context of a hostile takeover bid, special attention should be given to the passivity rule that applies to the directors of the target company.

Nevertheless, the new takeover bid regulation treats mandatory and voluntary takeover bids quite differently. The main differences between them are the following. In the framework of mandatory takeovers bids, the price offered must be an equitable one, being subject to the CNMV's approval, in a voluntary takeover bid the price can be freely determined by the bidder. Mandatory takeovers bids must be filed for 100% of the share capital of the target company, whereas voluntary takeover bids can be launched for a lower percentage of the total share capital. The effectiveness of voluntary takeovers bids can be subject to the fulfilment of almost any kind of condition. In contrast, a mandatory takeover bid can only be subject to clearance from the antitrust authorities. Finally, the events under which a bidder of a voluntary takeover bid is entitled to withdraw its offer are less restrictive than in the case of mandatory takeover bids.

Sanctions for not complying with the regulations on takeover bids include the following. (i) The voting and ancillary rights attached to all the shares held directly or indirectly by the infringing party in the target company may not be exercised; (ii) Any resolutions of the target company based on a majority of votes including the shares whose rights have been suspended shall be deemed void; (iii) Fines and other penalties; and (iv) In the case of senior managers or directors, disqualification from holding the office of director.

Under the ex-post bid system introduced by Law 6/2007 and Royal Decree 1066/2007, apart from a few exceptions contained in the transitory provisions, there is only one threshold that triggers the obligation to file a mandatory takeover bid for 100% of the share capital of the target company. This threshold is set at 30% of the voting rights in a listed company and is triggered when a person reaches or exceeds this percentage of the voting rights by an acquisition of shares or other securities that confer, directly or indirectly, voting rights in the target company; entering into a shareholders' agreement or acting in concert with other shareholders; or an indirect or subsequent acquisition of control (such as a merger with a listed company, takeover of a company that directly or indirectly holds a stake in the target company, share capital reduction.)

Furthermore, a mandatory takeover bid would also be triggered in the event that a person reaching a percentage of voting rights less than the 30% threshold were to appoint a number of directors who represent more than half of the board members within the 24 months following the date of the acquisition of this percentage.

Competition and antitrust

There have not been any major developments since the new Spanish Law on the Defence of Competition (Ley de Defensa de la Competencia, LDC) entered into force, on September 1 2007. Royal Decree 261/2008, of February 22 2008, approved the Regulation for the Defence of Competition which developed the LDC.

M&A transactions qualifying as concentrations and exceeding the relevant thresholds must be notified to, and authorised by, the National Competition Commission (NCC) or, if it were the case, the Council of Ministers.

The merger control procedure is divided into two phases. In the first phase, the Investigation Directorate of the NCC analyses the transaction and submits a report and a draft decision to the Council of the NCC. The Council of the NCC will authorise the concentration, with or without remedies that the parties may have offered, if it does not raise serious competition concerns. Conversely, if the concentration raises serious competition concerns then a second phase is initiated. During this phase, the Investigation Directorate issues a statement of objections identifying the main concerns. The notifying parties, as well as any third party with a legitimate interest, may submit allegations to the statement of objections and a hearing may take place before the Council of the NCC who will decide whether to prohibit the concentration, or to authorise it with or without remedies or conditions.

The Council of Ministers is entitled to re-examine the concentrations that have been prohibited or subjected to commitments or conditions on the basis of grounds of public interest listed by the LDC.

When a concentration takes place in a regulated market (in particular in the energy and telecommunications sector), the Investigation Directorate must request, in the context of the first phase, a non-binding report from the relevant sector's regulatory body on the effect that the concentration could have on the market.

Under Spanish competition rules, the substantive test for assessing the anticompetitive effects of a concentration is not based on whether it creates or strengthens a dominant position, but rather if it results in a substantial lessening of competition (SLC). Although in most cases both tests lead to similar outcomes, the SLC test can be considered more comprehensive than the dominance test as some transactions might substantially lessen competition without necessarily creating or strengthening a single or collective dominant position.

Notification of an M&A transaction to the Investigation Directorate of the NCC is mandatory when it constitutes a concentration and it meets certain turnover or market-share thresholds (see below).

Transactions are regarded as concentrations when they bring about a lasting change in the control structure of the companies concerned by means of the merger of two or more previously independent companies, the acquisition of control over the whole or parts of one or more companies or the creation of a joint venture.

A lasting change in the control structure of a company is said to arise when the transaction confers the possibility of exercising a decisive influence over the activities of the company.

Concentrations, as defined above and not falling within the exclusive jurisdiction of the European Commission, must be notified to the NCC if they reach either of the following two thresholds: as a consequence of the transaction, a share of at least 30% of the national market for a certain product or service, or of a defined geographic market within the national market, is acquired or increased; or the combined aggregate turnover of the parties in Spain in the previous financial year exceeded €240 million, provided that at least two of the companies involved in the transaction each achieved a turnover in Spain of €60 million.

Author biographies

Oriol Armengol


Partner and head of the EU and competition department at Perez-Llorca, Oriol Armengol has vast experience in advising on competition law matters. He acts in administrative proceedings before the Spanish and EU competition authorities, as well as before the regulatory bodies of various sectors in Spain. He regularly advises companies on mergers and his team has been involved in some of the most significant corporate transactions in the Spanish market.

Armengol graduated in law from the Universitat Autònoma de Barcelona in 1992 and in 1993 went on to study a masters in European Studies at the Institute of European Studies in Barcelona before studying at the University of Liège in Belgium, graduating with a Masters in European Law in 1994. Armengol teaches competition and EU law at the Universidad Carlos III in Madrid as well as at the Madrid Bar, and frequently lectures at professional conferences and seminars. He has published extensively and regularly contributes to a number of legal periodicals.

Vicente Conde


Vicente Conde is partner and head of the capital markets team. Conde is an expert in Corporate Law and the stock market, and advises national and foreign clients on all types of corporate transactions relating to shares, finance and the stock market in particular. His experience and knowledge in this field have allowed him to take part in some of the most outstanding transactions carried out in Spain in recent years. Conde's experience and most recent transactions include high profile international takeovers, initial public offerings, block trades, issuing of convertible bonds, and mergers and acquisitions in the banking, finance and real estate sectors.

Conde has a law degree from the Universidad Autónoma de Madrid as well as a postgraduate degree in European Law from the Université Libre in Brussels, Belgium. As an expert in corporate law and the stock market, he regularly participates as a speaker at seminars and conferences and has published a wide variety of articles and works related to his practice areas.