Iberia M&A - No recovery on the horizon - May 2010

Iberia M&A - No recovery on the horizon - May 2010

Investments targeting Iberia based companies are further dropping in May reaching the all-time low during the last twelve months, not taking into account August (typical vacation period in Spain). The evolution is somewhat worrisome: deal volume is down 62% on a month-on-month basis and a 80% on a year-on-year basis, whereas the number of transactions slipped 17% compared to April and 56% on a year-on-year basis.

There is a clear tendency over time:

Fewer transactions

Smaller deal volume by transaction

And a recovery is not in sight!

The current development of the Spanish economy and the perceived country risk, which became manifest in the recent downgrading of Spain's sovereign credit rating, does not give reason to expect a recovery of the M&A activity in the short term.

With regards to the perceived country risk "Spain yesterday got through a critical test to borrow money by offering high interest rates, but strong demand for the debt showed the markets were not as alarmed about the nation's finances as had been previously thought", asToday Online reports. Spanish Treasury issued EUR 3 billion in 10-year bonds at an average yield of 4.864% and EUR 479 million of 30-year bonds at 5.90%. Last Tuesday EUR 5.2 billion were placed at the markets.

Nevertheless, the Spanish market offers interesting opportunities in terms of current pricing as well as of pending market consolidation in many industries. RecallingWarren Buffett's saying "The time to get interested is when no one else is. You can't buy what is popular and do well.", it might be the right time for long-term oriented investors to do a good bargain in Spain.

Data source & full report:Zephyr published by BvD

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