SPAIN Trends and Developments Contributed by: Ignacio Sanjurjo, Ignacio Echenagusia, Alejandro Espín and Román Cantín, Deloitte Abogados y Asesores Tributarios, S.L.U.
In terms of VC investments, the software sector emerged as the most active in 2024, with 134 trans - actions (representing a 60% increase compared to 2023), followed by the internet and IT services sector, also with 134 transactions (21% decrease compared to 2023), the biotechnology and pharmaceutical sec - tor, with 42 transactions (19% decline compared to 2023) and finally the business and professional sup - port services sector, with 29 transactions (decrease of 26% compared to 2023). Finally, in terms of investment volume in 2024, accord - ing to a SpainCap report, 725 transactions were com - pleted, compared to 844 in 2023. Nonetheless, it is worth noting that the investment activity of Spanish entities remains robust, with the majority of these transactions being carried out by domestic fund man - agers, both public and private. 2025 Deal Activity and Expectations FY 2025 is expected to be one in which investors will adopt a cautious approach, with careful selection of their investments. Nonetheless, given the upward trend in investment observed during the second half of 2024, the authors anticipate that – if accompanied by an improvement in the geopolitical and domestic land - scape – this may contribute to a rebound in invest - ment levels, with the aim of achieving the national and international levels of investment recorded in 2022. Regulatory Changes New legal framework for leveraged mergers Royal Decree-Law 5/2023 of 28 June was published on 29 June 2023, in the Official State Gazette ( Boletín Oficial del Estado ). This new regulation established a legal framework for structural modifications of capi - tal companies (both domestic and cross-border) and established certain amendments (effective as of 29 July 2023) that affect the legal regime governing spe - cific types of structural changes, with potential impli - cations for PE transactions. One notable amendment related to leveraged mergers following the leveraged acquisition of a target com - pany was that, under this new regulation, the expert report required in these cases is no longer obligated to determine the existence of financial assistance. This amendment simplifies the procedure and eliminates
the controversies often associated with evaluating financial assistance in such transactions, particularly given the inherent difficulty for experts in determin - ing whether such assistance is reasonable. The elimi - nation of this requirement offers several advantages for PE funds involved in leveraged mergers in Spain, including accelerated execution, cost reduction and greater deal flexibility. Amendment to the investments made by non-EU/ European Free Trade Association (EFTA) investors Royal Decree 571/2023 regulates the suspension of the liberalisation regime for foreign direct investments (FDIs) in Spain. Under this framework, certain transac - tions are subject to prior administrative authorisation in specific circumstances. In particular, any investment carried out by non-EU or non-EFTA residents – or by EU/EFTA residents whose ultimate beneficial owner is based outside these areas – must obtain prior authori - sation from the Spanish government when any of the following conditions are met: • the foreign investor acquires 10% or more of the share capital of a Spanish company, or gains effec - tive control over it; • the investment target is included in a sector classi - fied as strategic (like energy, healthcare, transport, data processing or finance – sectors commonly linked to PE and VC activity); and • the total value of the investment exceeds EUR1 million. Additionally, Royal Decree 571/2023 defines what will be understood as foreign investments in Spain – including among others, the following cases: • acquisitions involving a shareholding of 10% or more in the capital of companies incorporated in Spain; • the acquisition of interests in collective investment undertakings where the management company is based in Spain, resulting in a stake of at least 10% of the target’s assets or share capital; • contributions to the equity of Spanish companies made by shareholders holding more than 10% of the share capital, even where such contributions do not involve a capital increase;
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