US firms head for Spain's booming markets - but time is of the essence
22 January 2007
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Spain is hot at the moment - and it's got nothing to do with the climate. While UK firms are hunting out opportunities in Eastern Europe and Asia, the US firms have turned their attention to the Iberian peninsular.
The M&A and equity markets are booming and the arrival of private equity houses in recent years has created more work for lawyers.
Luis de Carlos, joint managing partner of leading Spanish firm Uría Menéndez, says: "The Spanish market is very open and growing and is very attractive to foreign firms.
"Private equity houses have had an influence. The traditional model is one buyer and one seller, but now you can have auctions with five, six or seven parties."
Iberia is hosting one of the biggest deals of the year so far, with telecom company Sonae's $14bn (£7.13bn) bid for Portugal Telecom. The deal has created work for seven of the region's top firms, including Cuatrecasas, Garrigues and Uría.
Private equity houses such as Texas Pacific Group and Kohlberg Kravis Roberts & Co were also in the running for the Portugal Telecom takeover last year.
Prominent private equity houses in Spain include 3i and Goldman Sachs Global Capital, which have been enjoying the market conditions for years.
Other mega-deals that have hit the headlines in recent months include Gruppo Ferrovial's £10bn takeover of UK airport operator BAA and E.ON's proposed e26bn (£17.14bn) takeover of power company Endesa.
The activity has attracted the attention of the big US firms, always ready to exploit a business opportunity. Hourly rates are good, especially with the weak dollar.
Most foreign firms charge domestic clients around e350 (£231) an hour and network clients upwards of e450 (£297).
Latham & Watkins is the first new entrant, starting 2007 with two new offices in Barcelona and Madrid and hiring Cuatrecasas corporate star José Luis Blanco.
They have seen that the effort of launching a small office could be rewarded with lucrative mandates.
Jones Day, which beat Latham to an office in Spain by six years, has managed to develop relationships with Vista Capital, Fides Capital and CVC Capital Partners.
The firm's managing partner in Spain Luis Riesgo has spotted Latham's recruitment ads for associates in local business newspapers. The firm is targeting lawyers with backgrounds in M&A and private equity.
"When I saw that I thought to myself, 'that's our model', and it's worked in our case," says Riesgo.
The model is to keep small, focused and elitist. Managing conflicts is a priority.
Riesgo adds: "You don't need 70 lawyers, but you do have to be focused. You have to consider that, when you choose to do work with some clients, you're excluding others."
There are two ways a US firm can launch in Spain to get those clients:Juan Miguel Goenechea, Uría MenéndezGoenechea's experience in the market stretches back almost 25 years, making him a leading figure. He has relationships with both large companies and private equity houses. His clients include energy giant Acciona, private equity houses Capital Risego Global, CVC Capital Partners and Goldman Sachs Global Capital. A major coup if any firm could prise him away from Uría.
Fernando Torrente, CuatrecasasAfter a three-year spell as a partner at Allen & Overy, Torrente rejoined Cuatrecasas in 2005. His knowledge of how an Anglo-Saxon law firm operates could make him a prime target for new entrants into the Spanish market.
Salvador Sánchez-Terán, Uría MenéndezA partner at Uría for 10 years, Sánchez-Terán has built up a reputation for quality work. He has strong relationships with BancBoston Investment, Banco Santander Centro Hispano, highway company Grupo Avanza and airline Vueling.
Fernando Bautista, Freshfields Bruckhaus DeringerBautista joined Freshfields in 1998 after nine years as a corporate finance and capital markets partner at Garrigues. As head of finance for Freshfields in Spain, he has built up relationships with Morgan Stanley and Bank of America Securities. Familiar with life in Spanish and UK firms, he would be a useful addition to any US firm.
Fernando Vives, GarriguesVives is the head of corporate at Spain's largest firm. With 16 years at the firm, Vives is trusted with overseeing transactions for a wide variety of clients. Last year he advised real estate investment company Inversiones Immobiliares on a €124m (£81.73m) deal with Keldonk Holdings.either through a merger with a respected corporate boutique or landing a big name from one of the top Spanish firms.
But both are proving tricky for the foreign invaders. Whereas UK firms are being welcomed in Eastern Europe with mergers and strong alliances, Spanish firms have proved to be fiercely independent.
Pedro Pérez-Llorca, managing partner at top corporate firm Pérez-Llorca, says: "We have a strategy of being independent that has worked very well. We've been approached for mergers and we're declining those invitations.
"We're not pessimistic about US firms coming. The more competitive the market, the better we fare."
Similarly, the right people are few and far between. Despite offering remuneration packages of up to $1.5m (£764,000), US firms are having trouble convincing the best partners to make the switch.
De Carlos, one of the most respected equity specialists in Spain, says: "I started working here in 1983. I have all my friends here. It would be extremely difficult for me to work for a different firm. It's not easy to recruit."
If the US firms want to break in to the market, then they should act quickly to catch all the activity. De Carlos sees the market peaking in 2007, saying: "We grew by 18 per cent in 2005 and 20 per cent in 2006 and this year should be a good year. There will probably be a slowdown after that."
De Carlos predicts slower growth, of around 8 per cent, for his firm in 2008 and 2009.
Despite the difficulties, a Spanish office is worth the effort. The lesson for US firms is to launch a lean operation and to be focused. And with the market expecting to slow down in 2007, time is a crucial factor.
#TOP five Spanish deal-makers Any US firm with plenty of cash and ambitions to get into Spain should consider the following names to open with a bang.