• Madrid Investment Attraction

Increasing volume of operations and opportunities in mergers and acquisitions, with Madrid playing a leading role

September 2021

Mergers and acquisitions (M&A) operations account for a significant part of FDI flows in developed economies.

These types of operations are highly elastic to economic cycles. When the economy contracts and uncertainty increases, the number of operations decreases. Thus, during the global financial crisis, the number and value of operations fell dramatically, with cross-border operations declining more than domestic ones due to the added uncertainty.

However, corporate restructurings, asset sales and opportunistic purchases could push activity levels higher. Company devaluations could bring asset prices down and opportunities could arise for seekers of assets that have been subject to forced sales or have come under liquidation.

Some specific mergers and / or acquisitions operations attract a lot of attention due to their strategic implications, especially in sensitive industries. Hence the protection mechanisms with which the European Union was endowed, and, as of last year, Spain in particular.

However, they also have an immediate positive impact, namely, the increase in FDI figures when a local company is acquired by a company with foreign capital.

What are the effects of M&A operations?

Mergers and acquisitions are operations in which a foreign company acquires a controlling stake in a local company. This control is obtained when this participation is 10% or higher. These operations can help sustain existing activity, but they do not expand the social capital of the economy.

Mergers and acquisitions do not imply an expansion in the levels of production, capital endowments or employment in the economy, but changes in ownership can be associated with positive secondary effects. This is so because, although there is no guarantee that spillovers will materialize, cross-border investments may be accompanied by subsequent improvements in governance, access to finance, or the valuation and productivity of assets. acquired.

Current market situation

At the beginning of the Covid-19 pandemic, multinational investment companies drastically reduced their investments in equity. This drop, together with the slowdown in cross-border mergers and acquisitions (M&A), resulted in a marked deterioration – practically zero growth – of the equity component of FDI .

In the last quarter of 2020, M&A deals grew again, and the number of operations grew relatively rapidly.

This increased activity was characterized, first of all, by the growing weight of sovereign and private funds. Private funds did not accumulate as much debt as multinational companies and their investment capacity was greater. This fact, added to the investment opportunity posed by the low share prices and the financing needs of companies worldwide, could encourage greater investment by private funds.

On the other hand, opportunistic acquisitions by multinationals are more common in asymmetric crises -such as the Asian financial crisis- and although the Covid-19 pandemic has had different effects in each region, it has generated a complex economic situation in all of them, which has not resulted in large operations of this nature. If anything, the trend towards greater scrutiny of investment in strategic sectors, which was already underway before the pandemic, has accelerated in all OECD countries.

Greater scope of the investment protection regime

The restrictions on investment put in place by governments during the crisis, with greater controls and prior authorizations and specific regulations in the European Union and also in Spain, will remain in force for the time being.

The legal framework that applies to investment operations, including M&A, is based on screening mechanisms or prior authorizations of investments implemented in developed countries and, in particular, in European Union member states, with the aim of protecting sensitive or strategic sectors.

This restrictive framework increases uncertainty, and in the case of Spain, decisive action is needed. The instruments of selection and protection with respect to foreign investment need to be compensated with measures that favour it, selectively, yes, but also decisively. MIA’s intelligent targeting of the appropriate investment segments, as well as the reinforcement of actions in this direction, aim to minimize the effects of this conditioning framework on foreign investment.

Importance of M&A operations

According to UNCTAD data, in the last five years (2016-2020), Spain was the sixth country worldwide and the third in Europe that received the most cross-border M&A operations; a total of 1,341 operations, 268 on average per year. These operations involved a joint investment of $ 105,7 billion, $ 21,1 billion a year, which placed Spain as the eighth world economy in this type of operation and sixth in Europe.

According to the Investment Registry, in the last five years (2016-2020), acquisitions accounted for 44% of the gross flows received each year, reaching 60.4% in 2018, the year in which large-scale acquisitions were made (like the Abertis-Hochtief operation).

Data for 2021

According to Mergermarket, 287 operations were registered in Spain (78 more than the previous year) in the first half of 2021, for a total amount of 29,2 billion euros (more than double the previous year), the highest figure in the last three years.

Spain experienced strong growth, both in the number of operations and in terms of volume. In the first half of the year, 8 operations for over €1 billion were announced and over 10 billion accumulated in operations for five consecutive quarters

The most significant operation was the acquisition by the Australian investment manager IFM of 22.7% of Naturgy Energy Group (5,1 billion), the largest gas distributor and the third largest energy distributor in Spain.

US private equity firms were particularly active, with the most prominent example being Platinum Equity’s purchase of Urbaser for 3.5 billion.

The most active sectors in terms of the amount of operations were energy, mining and public services, thanks to very significant operations and the appetite for renewable assets following the country’s ambition to reach 120GW of renewable installed capacity target by 2030. In addition to the aforementioned operations, the Swedish fund EQT Partner’s bought Solarpack Corporacion Tecnológica for 1,2 billion, and the Canadian energy company Northland acquired the wind and solar portfolio of the venture capital fund Helia Renovables (1 billion), puting Northland among the 10 largest renewables operators in the country.

It should be noted that five of the nine biggest financing rounds of the year were undertaken by buyers from outside Europe.

Domestic M&A activity was also relevant. In the first semester, 172 operations were registered for a value of 7,400 million – increases of 28% and 52.7%, respectively. The purchase of Euskaltel by MásMóvil Intercom (a company in the hands of British and North American funds) was especially noteworthy. Indeed, the technology sector proved to be very dynamic: in the first half of 2021 there were 34 operations, compared to 12 in the same period last year

In short, the positive evolution of the pandemic and the arrival of European funds are helping to spread the feeling of optimism for the Spanish economy and, therefore, for M&A operations.

Favourable outlook for Madrid

Many of the M&A operations mentioned above have been carried out on companies based in Madrid. Other important operations announced (the sales of Telxius and Telefónica’s submarine cable, the sale of Ferrovial’s environmental business and the purchase of Burger King Spain, among others) and some not yet completed predict a record year for Spain and Madrid. Not all operations will be reflected in FDI flows, since some operations only constitute changes of ownership between companies with foreign capital, but, in any case, the ultimate holders will be modified and there will be valuation adjustments. The investment stock data that will be available in two years will offer a better perspective

In any case, at MIA we will continue to carefully analyze the dynamics of international investment, an essential task to provide effective support to investors who bet on our city to carry out business, which will revert to greater wealth for Madrid and its citizens.

Top Deals in Madrid, H1 2021


Target company


Bidder company



Deal Value



Naturgy Energy Group (22,69%)

Energy, mining & utilities

IFM Investors



5 060


ACS Actividades de Construccion y Servicios SA



Vinci SA


ACS Actividades de Construccion y Servicios SA

4 200


Urbaser SA

Industrials & chemicals

Platinum Equity LLC


China Tianying Inc

3 500


Wall Box Chargers SL

Industrials & chemicals

Kensington Capital Acquisition Corp II





Helia Renovables

(a 540 MW Operating Wind and Solar Portfolio)

Energy, mining & utilities

Northland Power Inc


Helia Renovables FCR

1 061

Source: Mergermarket.com, Iberia Trend Report H1 2021