What is the current state of M&A operations in our country?
Currently, we have a slightly less dynamic M&A market than in 2023 (May 2024 vs. May 2023), with a 4% reduction in the number of closed deals but a 51% increase in total deal volume. This means that there is a resurgence of large transactions, which serve as a good indicator of what will eventually reach the middle-market.
Despite the uncertainties linked to political instability and geopolitical tensions, macroeconomic policy outlooks are positive, given that there has been an initial interest rate cut in Europe (though not in the US). While there is no clear visibility of further rate cut announcements, it is expected that price escalation has been controlled and that current measures will be relaxed. This has been generating a positive dynamic in investment decision-making and access to financing over recent months, fostering a booming M&A market.
Do you think entrepreneurs rely too little on specialized firms for these types of transactions?
In general, I think it is very common to turn to specialized professionals. M&A processes have become highly professionalized at all levels and for all types of companies over the past few decades, and they are always strategic projects for the parties involved. Therefore, it is highly advisable to work with an advisor who understands the intricacies of these types of transactions. However, we still encounter some entrepreneurs in the market, though fewer and fewer, who prefer to go it alone, personally engaging in usually highly technical negotiations and possibly being unable to tie up the deal properly in key aspects like price structure, liability regimes, warranties, etc.
Are specialized firms in this market better or worse positioned than the European average?
I wouldn’t say we have a better or worse position than the European average. The size of M&A advisory firms is closely tied to the average company size and economy of a given country. It’s true, for instance, that Spain has a large percentage of micro-SMEs, but at the same time, there are highly relevant industries, and we are the fourth-largest economy in Europe by total GDP.
Spain has a significant proportion of family businesses. Do you think they generally need more professional management?
We see a wide range of cases in the market. Some family businesses have an urgent need to professionalize their management to be sustainable in the medium/long term, while others operate like multinational companies but with the flexibility that comes from faster and more adaptive decision-making. What is clear is that we need entrepreneurs with the ambition to lead growth and consolidation processes in different sectors, which will allow us to compete in an increasingly globalized world with multinational competition, if we want decision-making centers to remain in Spain.
Which sectors are currently performing the best in the Spanish economy?
Besides tourism and construction, historically key drivers of the Spanish economy, the pharmaceutical industry and ICT are performing well, and this trend is expected to continue. Not to mention other essential sectors like transportation and logistics, agri-food, automotive, etc.
What challenges have you set for yourself in your new role as partner within the company?
ALBIA is a constantly evolving project. We have a strong team with a healthy balance between experience, strategic insight, and potential, along with fresh vision and ambition. Based on this, our goals are to continue growing with our existing and new clients through several avenues: i) geographically, we will continuously expand into new markets, ii) sector specialization, allowing us to provide tailored services, and iii) expanding our service portfolio. Additionally, internally, we have been investing in digitalization and new tools that will enable us to make the most of all the information we handle, always with the aim of providing even better service to our clients.
There is a lot of literature on business valuation. What are the valid criteria for a proper economic valuation of a company, in your opinion?
We could dedicate an entire section to analyzing the strengths and weaknesses of each valuation method. However, to be succinct, we mainly work with two methods:
i) discounted cash flows and
ii) multiples of comparable transactions. For the first method, a business plan must be developed at all levels to estimate the expected cash flow generation, which will then be discounted at a specific rate to obtain the current value of the company. It’s crucial to work with realistic assumptions and conduct sensitivity analyses to arrive at a reasonable valuation range. This reasonable valuation range should align with multiples of comparable transactions, although there may be significant inefficiencies in the market data (published information may not be accurate due to off-balance-sheet adjustments to EBITDA, inflated prices due to auction processes, market conditions, etc.).
How do you see the current economic situation in Spain? Do you see more positives or negatives for 2024 and 2025?
The tightening of monetary policy during 2023, aimed at controlling price trends, resulted in a year of uncertainty and significant reductions in access to financing. Nevertheless, the Spanish economy proved resilient, recording GDP growth of 2.5%. Currently, after a recent rate cut by the ECB, we see more positives than negatives regarding monetary policy, which will boost consumption and investment.
Which sectors have the most potential, and where would you recommend investing in the short and medium term?
Strategic sectors and those with significant potential for scaling their business, such as the technology sector and digital transformation, are currently attractive options. Renewable energy is another sector in constant growth with major disruptive challenges, also related to mobility, as we seek and consolidate alternatives to polluting production systems.
What is Albia Imap’s differentiating factor? What sets you apart in terms of your value proposition?
Our value proposition is entirely client-focused. These projects represent crucial, often once-in-a-lifetime decisions for an entrepreneur selling their business, or they are strategic for large companies or funds looking to execute a growth plan through an acquisition. We are fully aware of this sensitivity and act accordingly, putting all our efforts into achieving a successful closure with honesty, transparency, and a fresh perspective.
Albia Imap was founded in 2004. In these 20 years, what has changed in the field of M&A, restructuring, and company valuation?
ALBIA was born to serve a market segment that was highly underserved at the time. Today, as a result of the professionalization that has occurred at all levels, there is a whole ecosystem of advisors, investors, etc., that sustains it.
Looking ahead, the challenge we are already working on internally is how to coexist with increasing digitalization, artificial intelligence, etc.
Is it more efficient to buy a company in the same market in which you operate than to grow organically?
Certainly, it allows for much faster growth compared to organic growth. To grow naturally, you must differentiate yourself from your competitors, displace them, enter new markets, launch new technologies, expand boundaries, attract talent, etc. All of this can be achieved through acquiring a company with a specific competitive position, integrating it upon closing the deal, and quickly putting capital to work. However, conducting a successful post-acquisition integration process is essential for inorganic growth to bear the expected fruits.
You have participated in over 30 projects, both nationally and internationally. What is your view of entrepreneurs in our country? Is there a strong financial culture and a drive for professionalization? Is there still room for improvement?
I would say that there is still a significant way to go. Many entrepreneurs face important decision-making throughout their careers with fewer resources and less knowledge than would be ideal, learning over time through successes and especially mistakes. I consider it essential, in both professional and personal spheres, to have a solid foundation of financial literacy, which should be taught from a young age. Unfortunately, this is generally lacking in our country.
What types of clients are you looking for in this new phase of the company, and with your arrival?
We have different types of clients, which we can divide into three groups: family businesses, multinationals, and investment funds. Our goal is to continue making progress in these areas, establishing ourselves as a leading advisor for middle-market M&A transactions, ranging from €10 million to €100 million.
