EUROCONSULTING Asesores Financieros was founded in 1997, initially focusing on subsidy management and real estate consultancy. In 2016 it re-emerged, adding new lines of corporate finance consultancy, and currently advises on the following areas: project and company financing, with a particular focus on alternative financing to banking, and the sale and purchase of companies and real estate assets, an activity known as Mergers & Acquisitions or M&A, in the intermediate market, the so-called “middle market”, with a transaction volume of between 3 and 100 million euros. The firm may advise both the buyer and the seller in a transaction, but never both in the same transaction, for ethical reasons to avoid conflicts of interest, and its focus is on achieving the best deal for the client, whether it is the buyer or the seller. Sometimes, prior to the sale and purchase or financing transaction, it is also advisable to advise the company being sold on a transformation that will improve its saleability, services that can also be provided from a consultancy point of view, as we have experts specialised in this sector who are also experts in sale and purchase and financing transactions.
Antonio Díaz-Barceló Caffarena, Chairman and Managing Partner of EUROCONSULTING Asesores Financieros
You are a firm made up of partners. What is their profile and professional background? What does a firm with this structure bring to the client?
EUROCONSULTING has an internal network of around 30 partners and senior advisors, engineers, architects, lawyers and economists, who share two characteristics: they are experts in a sector in which they have developed a successful professional career, typically with more than 20 years of experience, and they have managed financing operations and the sale and purchase of companies and real estate assets. It is this sector and transaction management knowledge that guarantees the success of the transactions on which they advise. Before we start working with a client, an internal committee of partners checks that the transaction is likely to succeed. If any obstacles are identified, such as unrealistic price expectations or other impediments, the transaction is rejected. Our success is the success of our clients, and we therefore want to filter out those projects where we can actually provide advice that will bring the transaction to a successful conclusion.
What is your assessment of the current state of the mergers and acquisitions (M&A) market in Spain, and have there been any notable trends in recent months?
The market for the sale and purchase of companies where one of the parties (buyer or seller) is of a different nationality from the other (so-called cross-border M&A) has been growing steadily since 1985 and is now estimated to represent 32% of the total market. These global trends affect the entire corporate finance market, and Spain is no exception. EUROCONSULTING has clients of different nationalities and participates in these Cross-Border M&A transactions, as evidenced by the advice given to Finanbest in its sale to MyInvestor, part of the Andbank Group, and the purchase of residential property in the centre of Madrid for an investor of Venezuelan origin, which fall within this type of transaction. Of course, there are also political, economic, social, legal and environmental factors that can make a country more or less active than the rest of the world in a particular sector or area of corporate finance activity at any given time.
Which sectors are currently the most active, and are there significant differences compared to previous years?
I believe that the world is currently experiencing two interesting revolutions: the technological one, driven by artificial intelligence, the metaverse and other technologies, and the one related to sustainability. Large companies are investing in these two areas in order not to be left behind. In the mid-market, the buying and selling of businesses is often not driven by these macro-trends or the business strategy itself, and entrepreneurs often sell their businesses simply because when they retire they have no offspring to run the business and they prefer someone else to run it, or for other personal or business reasons that lead them to want to sell the business. Therefore, in this mid-market, M&A transactions are always possible in a wide range of sectors.
What is the outlook for the M&A market in the coming months, and do you foresee an increase in the number of transactions and deal size?
The peak of the sector, both in terms of number of transactions and volume, was reached in 2021. In 2022, with such a strong base for comparison with the previous year, there were double-digit declines in both of the above parameters, and although a recovery was expected in 2023, in the first half of this year the decline in activity has continued, albeit at a slower pace and already at a single-digit rate of decline. I would attribute this decline to two fundamental factors: the rise in interest rates and its impact on asset and company valuations, making it difficult for buyers and sellers to match price expectations, and the war in Ukraine and its impact on the global economy. I believe that both factors have already had an impact on the M&A sector and that the decline in activity in this sector has bottomed out and we will soon see an increase in activity in the second half of 2023 or as early as 2024.
In your opinion, what are the main opportunities and challenges that an entrepreneur faces when selling his company? How does EUROCONSULTING support them in this process?
The entrepreneur mentioned above, who wants to sell his company because he has no descendants who want to take over the business, is often the client of EUROCONSULTING. The entrepreneur should be aware that the desired retirement date is not necessarily the best time to sell his company, so it is advisable to seek advice to organise an orderly sale process and to be able to sell it well. This advice may involve some form of reorganisation of the business structure and also requires a degree of flexibility in choosing the timing of the sale and, sometimes, not turning down a good sale offer that comes unexpectedly. We sometimes meet entrepreneurs who have turned down interesting offers to sell their business because they wanted to hold on to the helm a little longer and then regretted it. They would even sell later for less and it is no longer possible.
How would you describe the current situation of the property market in Spain and how is the rise in interest rates affecting the sector and transactions?
The residential market is the most important property sub-sector, accounting for more than half of property activity. The rise in interest rates, combined with the increase in house prices, has led to a decline in housing sales activity. The figure for home sales in Spain in April 2023 shows a decline for the sixth consecutive month, with a year-on-year fall of 3.4%. This figure also includes a fall in sales to foreigners, as Germany and other eurozone countries are in a technical recession. In terms of property prices and valuations, the impact of rising interest rates has been more limited or even nil than might have been expected, and house prices have continued to rise across the board in Spain, perhaps because there is not enough supply to meet market demand. Nevertheless, the housing market is asymmetric and local, and not all locations behave in the same way. If I had to highlight two markets with strength in the residential market at the moment, I would say Madrid and Malaga.
What are the most relevant types of real estate transactions currently taking place in Spain?
In the non-residential property sub-sectors, transaction activity is generally positive. In logistics, there is oversupply in some areas, but the medium-term fundamentals are sound and new projects continue to be developed and existing ones transacted with steady price increases. Even offices, which have suffered from trends such as teleworking, are experiencing occupancy and price growth in the main locations, albeit more modest than in other sub-sectors. The retail and hotel sectors are also strong, with many transactions taking place.
So what do you think are the prospects for the hotel sector?
The sale of the Hotel Palacio de Retiro in Madrid at the beginning of summer 2023 was made at a price of 1.2 million euros per room, a new record that would have been unthinkable some time ago. But the reality is that there are almost no hotel assets for sale in Madrid, and those that do come onto the market are quickly snapped up. I believe that Madrid’s luxury hotel market is developing later than Barcelona’s and that there is still room for growth in hotel revenues and also in asset prices. I think Madrid will be followed by other places in this luxury segment, such as Valencia and Malaga, in terms of hotel transaction activity and price increases.
As a lecturer in technological innovation at the University of Nebrija, tell us about the impact you think the metaverse will have on business and the economy.
I believe that innovation and technology will be the drivers of economic and business growth in the coming years. The metaverse, although it has been talked about for some time, is still new and in its infancy. Even in the United States, which is at the forefront of this technology, business initiatives related to the metaverse are fragmented and scattered across a wide range of games and applications. However, it is worth noting that Meta (formerly Facebook) is investing close to $20 billion a year in the metaverse, which shows a clear commitment to the development of this technology. I believe that these emerging initiatives have yet to develop and then we will see a consolidation phase for those that have survived and grown. At the moment, there is not even technological uniqueness in the platforms related to the metaverse, so there is still a long way to go. In the medium term, I believe that the impact of the Metaverse on business and life in general will be very significant. The Metaverse is a technological breakthrough that can enable consumers and businesses to access new products and services in a very efficient way and through new channels.
Which technological developments do you think have had the greatest impact on education in the academic world, and to what extent have they changed teaching practices in universities?
The world of education has been profoundly transformed by technology. Digitalisation has made it possible to store content and “knowledge” in a much more efficient way. Videoconferencing platforms have made it possible to develop online courses, and today a large part of the activity of a university, not only academic but also administrative and secretarial, is carried out virtually. In the future, I have no doubt that artificial intelligence and the metaverse will be incorporated in this sector, as in others.
