Interview with Manuel Urrutia, managing partner, Confianz
M&A transactions have served in 2020 as a way of growth, international expansion or diversification of products or services in companies. The purchase and sale operations of companies doubled due to the pandemic, which forced the closure of many SMEs. Manuel Urrutia, managing partner of consulting firm Confianz defines this scenario as "of opportunity", both for the potential seller and the buyer, fed by the existence of a huge volume of liquidity and a lot of appetite for investment.
Spain´s Confianz has over 26 years of experience focusing on business law and consultancy. With its headquarters in Bilbao and offices in Donostia and Madrid, its 46 professionals help SMEs in economic-financial, accounting, tax, etc. matters and put their wide expertise at the service of the family business, where precisely the continuity factor has a specific weight.
Leaders League: Is selling the company an opportunity or a failure?
Manuel Urrutia: I would never see it as a failure unless it is a case of liquidation, but even then, if its continuity is achieved, it should not be considered as such. The sale has to be seen as a continuation option. Besides, selling does not imply giving up 100% of the company. When a client comes to us it is because he has a need related to his business continuity, a need associated with making investments, financing growth or a lack of management succession. In this last case, the solution may lie in finding a company in the same sector that will provide continuity, since a fund will always require stability and the existence of a management team at the helm. The property captures value through the price of the sale operation or through funds that come into finance investments, in fixed or working capital.
Who is buying companies?
Buyers can be investment funds, family offices, which have a similar philosophy, or companies in the same sector that see the acquisition of a competitor as an opportunity. The entry of third parties in the capital, whether investment funds or companies in the sector, can be used to meet needs arising from potential growth to be undertaken by the company. Investors, on the other hand, can find opportunities insofar as there has been a drop in sales figures, which means being able to enter at better prices than a year ago. However, in all cases it is a long process, with hard negotiations, very intensive in time.
Is there foreign interest in purchasing domestic businesses?
Yes, there is. One of the four operations we are currently involved in at Confianz is precisely a North American company looking for an opportunity to establish itself in Spain and complement its portfolio through this acquisition in order to sell the product worldwide. Besides, we have several investment funds interested in closing operations, which may be partially constituted by foreign capital.
"We would be surprised by the movement that is taking place in certain sectors shaken by the pandemic"
What sectors is the market leaning towards at this time?
Towards those with growth potential such as energy, electricity, industry in general, but also towards service companies; even sectors that are currently suffering, such as tourism, are proving attractive today. We would be surprised by the movement that is taking place, as of the second semester, in certain sectors that are, let's say, convulsed, with really important operations underway.
Is the Basque Country an attractive location for M&A activity?
As it is an industrial region, investors always have one eye on the Basque Country. And just as there are interesting companies for the investor, there are also Basque companies searching for alternative ways to bank financing and looking for answers in M&A operations.
In view of the recent CaixaBank-Bankia operation, do large operations have a better outcome than small ones?
Normally, a financial investor asks for minimum amounts, but it can be said that from an Ebitda of €1.5 million or €2 million you can become a target of interest for a fund, give it entry and thus enhance growth and generate value. In Confianz, we have advised many operations in the last eight years and closed an average of six a year. Transactions that range from five to thirty million Euros.