April 2015 | 12th edition
Capital Confidence Barometer:
Our latest Capital Confidence Barometer finds Spanish respondents eager to transact and planning acquisitions, with exactly half intending to pursue M&A in the next 12 months. This intention is bolstered by strong confidence in the local economy and key market indicators, along with a desire to invest in talent and new technology, as companies pursue their growth agendas.
The M&A outlook is positive, with more respondents looking to pursue deals now than in the past two years. Transaction activity in 2014 may be giving executives the confidence to make more and larger acquisitions in the coming months. Nearly half of Spanish companies expect to continue with their 2014 transaction strategy, while nearly one-third are planning relatively larger deals vs. last year. Accordingly, acquisitions will pick up in the upper middle market, with more Spanish respondents planning deals over US$250m vs. the global average. Twenty-three percent of respondents from Spain expect to complete more than five acquisitions in the next 12 months, compared with just 7% overall, and 27% plan to make innovative investments that shift the scope of their business.
Corporate players in Spain have worked hard in recent years to rationalize cost structures and portfolios. Their payoff is that they are now well prepared to focus on growth while controlling their costs and operational efficiencies. More than half of Spanish executives (59%) are focused on growth over the next 12 months, as opposed to a third (31%) of respondents overall.
Companies are focused on new and innovative means for organic growth, with innovation and new technology seen as the key drivers of change. With more than half of executives in Spain saying that technology is disrupting all areas of the enterprise, they are now preparing to innovate. They cite the top two drivers of their M&A strategy over the next 12 months as acquiring talent and accessing new technology or intellectual property. By contrast, the priorities of our global respondents are entirely different – they aim to leverage regulatory and legislative opportunities and gain market share in existing geographical markets.
Three-quarters of Spanish executives have a positive outlook on the local economy, compared with less than half who see the global economy as improving in the next 12 months. This disparity is driven by geopolitical concerns, with 39% of respondents from Spain seeing the Eurozone economic situation as the greatest economic risk to their business in the next 6 to 12 months, compared with just 10% globally. Also, nearly a third (31%) point to increased global and regional political instability as a significant risk. As a result, Spanish companies are looking outside Europe for deals. An overwhelming 69% of Spanish companies expect to go across borders and outside the immediate region to fulfil their M&A strategy in the next 12 months. The top investment destinations include China, Brazil, the US and India.
With the pillars of future growth – innovation, new talent and new technologies – firmly cemented, Spanish companies are poised to make considerable headway in new markets and capitalize on the positive global market for M&A.