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Spanish private capital investment reached a record high of EUR 8.5 billion in the last financial year. International funds continue to show great interest in Spain which is a country of great growth potential. If you decide to start a private equity deal in Spain, please note that such transactions mainly consist of the acquisition of controlling interests in private Spanish companies.

Shareholder rights

Investing in private equity companies in Spain are subject to the special clauses in the shareholder agreement that envisage the shareholder rights to:

  • have a seat on the board of directors;
  • veto decisions;
  • protection upon transfer of shares.

Besides these, shareholders have the right to receive information about the main events that have an effect on the company’s development. This right is independent of the right to vote, although there is a connection between them since it allows the shareholder to exercise the latter in a suitable and informed manner. 

This right is realized through:

  1. The possibility to request corporate information; 
  2. The possibility to examine the financial statements and the auditor’s report before their approval by the General Shareholders’ Meeting.

Corporate management issues

If you are interested in registering a company on an alternative stock market (MAB) in Spain, then this is a good idea, since this way you will get more flexible and comfortable conditions in terms of management requirements.

The most common option among private businesses is to register a private limited liability company in Spain.

Debt financing structures

Debt financing is an expensive way of raising funds as it involves an investment banker who will structure big loans in a systematic way. It is a good option when interest costs are low and the returns are better. If you are interested in having a private equity deal in Spain, these transactions are usually financed by a combination of debt and equity. Despite the fact that loans provided by banks are very common, debt funds have recently become increasingly popular.

Exit routes

An IPO is one of the ways to "exit" because the shareholders (investors and founders) of a company are able to sell some or all of their shares in the company for cash, thus "exiting" their investment. Prior to an IPO, it is not so easy for a private company to sell the shares to anyone, so the value that the shareholders have is not easily realizable.

When an IPO is selected as the exit route, before starting the process, one should ensure that all documents are well prepared to implement it. In particular, shareholder agreements should be checked as they often oversight entry into the IPO market in Spain.

To proceed with an IPO, a registration statement must be filed with the Securities and Exchange Commission. 

Once the company is available on a public stock market after an IPO, the owners can easily sell their shares to the general public.

Entering the IPO market issues

Uncertainty permeates the entire process of entering the IPO arising largely from the poor quality of public information. Investors usually know very little about the issuer prior to an IPO. The issuer, in turn, knows neither the investors who may show interest nor the degree of their interest. Investment banks function as intermediaries between issuers and investors and mitigate some of these information problems, but not all.

Entering the Spanish IPO market has its specific features, and blocking restrictions is one of them. This means that the private equity sponsor will be not allowed to transfer shares after the IPO for a limited period of time. 

Another local feature is that the underwriter has almost complete freedom of action in choosing the recipients of the securities, with the exception of shares reserved for “family and friends”, which the issuer can use at its own discretion.

In order to go through the IPO procedure, you should be patient. After all, carrying out all the preparatory stages can take a company from one to several years.

If you need advice on preparing a prospectus for entering the IPO market in Spain, as well as advice on a public offering in Spain, our legal experts are at your service.