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M&A opportunities in the Spanish market

The Spanish M&A market is at an exceptional moment, with great opportunities in thriving sectors and a generation of entrepreneurs looking for alternative solutions to the lack of succession and liquidity streams caused by the pandemic.

Growth of M&A Transactions

In October 2020, pre-pandemic levels of M&A activity were restored in Spain, driven by low interest rates and a high level of savings.

With more than 1,200 transactions carried out in the first half of 2021 and 56 billion euros mobilised from the United States, the United Kingdom and France, Madrid accounted for more than half of these operations.

Sectors with the Greatest Opportunities

From the end of this year until 2023, Look to the sales of an overflow of companies with unsustainable liabilities and the added pressure of investors’ need to rescue strategic resources from companies with forward-looking and success-oriented management teams.

Retail, energy, media and hospitality will experience high levels of disinvestment. The industrial sector, with a significant decline in transactions, as well as tourism and leisure, both hard hit by the pandemic, will see the greatest opportunities.

Other promising sectors include student and elderly care homes, coliving solutions, pet care, life sciences, freight transport and the specialised IT sector, all of which will play a major role in 2021. Potential other sectors that share as of yet undiscovered high added value may include: plastics processing, waste management and professional services.

Market players

There is significant activity from Spanish private equity funds, with growth funds and German and Belgian funds making strong bids for some assets.

Resources

On the financing side, deals have been closed with moderate leverage but without lack of liquidity, as investors are willing to do full equity deals and then leverage up.

ECOVIS Grosclaude & Partners promotes operations in the middle market segment, seeking investors for leading Spanish niche companies and non-successionary entrepreneurs and supports Central European investors with growth and consolidation objectives in Spain.

If you are looking to invest in Spain, our M&A consultants will be happy to help you locate the most suitable targets and accompany you throughout the process with our turnkey services.

ECOVIS Grosclaude & Partners provides intermediary services in M&A, Audit and Transfer Pricing.

For further information please contact:

Luis Grosclaude Manera, Managing Director and Mauricio da Costa, Associate M&A, ECOVIS Grosclaude & Partners, Madrid, Spain. Emails: luis.grosclaude@ecovis.es and mauricio.dacosta@ecovis.es

U.S. Tax Reform: International in the cross-hairs 

U.S. businesses still interpreting 2017 tax legislation will soon need to respond to Biden Administration proposals to fund ambitious plans to rebuild infrastructure and assist families.

In 2017, the U.S. tax base was expanded to include worldwide income through the creation of the Global Intangible Low-Taxed Income (GILTI) provisions, affecting nearly all U.S. multinationals. As detailed in the U.S. Treasury explanation, the Biden proposals would increase the GILTI inclusion by eliminating the offset for the deemed return on tangible assets and reducing the current corporate GILTI deduction from 50% to 25%. Coupled with a new corporate tax rate of 28%, these changes would more than double the tax rate on GILTI income. The proposal also imposes a “per-country” limitation on foreign tax credits available to offset the GILTI tax cost and eliminates the current high-tax exception to GILTI.

Further changes impacting multinationals include the repeal of the Foreign-Derived Intangible Income (FDII) deduction that provided benefits on export sales and the Base Erosion Anti-Avoidance Tax (BEAT). The FDII loss may be offset by new research and development incentives and general credits. The BEAT minimum tax provisions would be replaced by a new mechanism that denies deductions for payments made to related entities that are subject to a low effective tax rate, targeting large companies with more than $500 million in global revenues.

U.S. rules penalizing inversion transactions would be tightened by lowering the continued U.S. ownership threshold to 50% from the current 80%. An additional proposal would impose a minimum tax on book earnings of certain multinational corporations. This would be distinct from the proposed Global Minimum Tax under consideration by the G-7 leadership.

The U.S. objectives for infrastructure and family assistance will carry a significant cost. Revenues will need to be found to pay for these programs, and the continued suspicions cast on businesses working outside the U.S., and the diminished focus on cross-border considerations by most of the American electorate, make international tax increases a politically attractive target for legislators facing re-election challenges.

Reform to NGO Law: Guatemala

In Guatemala, the legislation on non-profit entities has not been so severe, so the authorities considered it appropriate to start the supervision and control in a strategic way based on good practices, always respecting constitutional rights, as well as the agreements and treaties that Guatemala has ratified, such as the American Convention on Human Rights, the International Covenant on Civic and Political Rights and the Universal Declaration of Human Rights, providing an incentive for the creation of non-profit entities and the fulfillment of the purpose for which they were constituted.

Decree 04-2020 issued in the Palace of the Legislative Organism, in Guatemala City, on February 11, 2020, contains reforms to the Law of Non-Governmental Organizations -NGO-, Decree No. 2-2003 and the Civil Code, Decree number 106, which will represent that NGOs in Guatemala begin the transition in the inspection, control, and publication of financial information for non-profit entities that administer and execute funds mainly from donations.

However, on March 2, 2020, the Constitutional Court granted provisional protection, preventing compliance with the regulations created by the legislature, and it was until May 2021 that the Constitutional Court declared the constitutional guarantee of protection presented by different NGOs and civil society organizations. The amparos filed were based on the constitutional and conventional violation of the right of association, freedom of action and international relations, arguing that the reform grants discretionary powers to the Executive by having the power to cancel the registration of the NGO, as well as to hold its directors responsible. criminally, administratively and civilly.

The new regulation now in force establishes that NGOs must carry out the following actions that demand greater controls for them and represent greater transparency:

• Publish your balance sheet at the close of each accounting year;
• Inform the Ministry of Foreign Relations when they receive donations from an external source;
• NGOs registered in another country that operate in Guatemala will also be audited and must comply with national legislation;
• They must maintain their political independence from donors and financiers;
• They must be registered in the Registry of Legal Persons attached to the Ministry of the Interior, in the Planning and Programming Secretariat of the Presidency -SEGEPLAN- when there are changes in the Board of Directors or the Legal Representative.
• If it is incorporated abroad, it must register with the Ministry of Foreign Relations and if it receives resources from the national or municipal budget, it must register with the Comptroller General of Accounts -CGC-, and
• Only the NGO can manage and receive donor resources.

For Guatemala it is important that there is legislation that grants powers to specialized entities for the control and supervision of organizations that can administer and execute public funds or donations, thus increasing the incentive for foreigners who seek to carry out social welfare projects. With more effective legislation, Guatemalans, through NGOs, can gain greater credibility with donors.