Dealmaker Q&A

Posted on March 5, 2021May 28, 2021

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TTR DealMaker Q&A with Araoz & Rueda Partner Guillermo Bueno

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Guillermo Bueno, Araoz & Rueda partner since 2021, joined our corporate department in 2013 after four years in the M&A department of Uría Menéndez.
Guillermo has experience in general commercial advice to national and foreign companies. He specializes in all types of transactions involving the sale of shares, participations, investments and divestments, as well as public offerings for acquisition, joint ventures, corporate restructuring and sale of assets, advising industrial clients and venture capital entities, both on behalf of the buyer and the seller.
He also advises regularly companies from multiple sectors (financial, health, telecommunications, internet, real estate, transport, etc.) in corporate and corporate governance matters, acting, in many cases, as secretary to the board of directors.

TTR: In 4Q20, M&A volume returned to ‘prepandemic’ levels, with a total of 639 deals. How do you interpret this upward trend compared to 2Q20 and 3Q20? What can we expect in terms of transaction volume in 2021?

G. B.: This is a very positive trend. I think during the second and third quarter of 2020 the Spanish economy was knocked out by the impact of the COVID pandemic. This put on hold many M&A transactions, which were reactivated during the last quarter.

In addition to the above corrective effect, M&A transactions have also been reactivated because currently there is a lot of liquidity in the market and interest rates are very low, making it relatively easy to obtain financing to carry out transactions.

On the other hand, the very positive number of deals in the last quarter shows that Spanish companies are very attractive to invest in. They have a lot of potential, good management teams and the capacity for growth and internationalization.

As for 2021, we will see how Brexit settles in and how the pandemic evolves. I hope that the vaccines take effect and that during the second half of the year COVID can stabilize without serious outbreaks. In any case, I believe that the M&A market will continue to grow in Spain because, as I said, we have good foundations for it. Liquidity will continue to be available and interest rates will remain low.

TTR: What is the current situation where corporate restructurings in Spain are concerned, and what are the prospects for the coming months?

G. B.: The companies are studying the impact that a prolonged effect of COVID may have on consumption habits and needs of their clients, as well as on the Spanish market. I believe that, as a result of the above, companies will have to restructure themselves in order to adapt to the changes that may occur in the market (investing more in technology or the management of employees due to the gradual increase of teleworking).

We are currently immersed in this process where many corporate restructurings are taking place in order to make their businesses even more efficient and adapt to a new reality that takes into account the long-term impact of COVID.

TTR: Foreign venture capital and private equity investment in Spanish companies fell 18% in 2020 after four years of growth. What level of VC and PE investment can be expected in 2021?

G. B.: I believe that the decrease in these investments has basically been caused by the COVID pandemic. During the first three quarters, foreign investors decided to stop investing to see how the Spanish economy would evolve.

However, I believe that this trend will be corrected and foreign investment will return to growth during 2021, especially in certain sectors such as energy, technology and health. We now have greater visibility on the COVID pandemic, investors have liquidity and interest rates are low. All this, together with the fact that the prices of Spanish companies are very reasonable, will increase foreign investment in our country.

TTR: Spain registered a 3.48% increase in the number of venture capital deals, as well as a 256.76% increase in aggregate value of these transactions. What factors brought about this growth and how will this trend impact the demand for advisory services in 1H21?

G. B.: I believe that the increase in private equity transactions is mainly due to three factors: firstly, Spanish companies are very attractive because of their capacity to expand and how well managed they are by their management teams. After the 2008 crisis, our companies became more professional and are now much more efficient.

Secondly, as mentioned before, private equity funds have a lot of liquidity to invest and interest rates are very low.

Finally, because of the COVID pandemic and the Spanish socioeconomic situation, Spanish companies are very attractively priced, which will provide great returns in the future.

TTR: The real estate sector continues to lead the M&A market in Spain: What will be the main drivers of consolidation in this sector this year?

G. B.: The real estate sectors that are expected to see the most activity in 2021 will be: (i) logistics, due to the sustained growth of internet sales; (ii) hotel and hospitality in general, due to the expected reactivation of tourism activity throughout the year and the likely adjustments that will occur with respect to previous sales prices; and (iii) within the commercial sector, retail parks, which will also benefit from the eventual increase in activity.

TTR: What will be the main challenges for Araoz & Rueda in its M&A advisory work in Spain in 2021?

G. B.: At Araoz & Rueda we are optimistic about M&A transactions in 2021.

Our main challenge is to continue to maintain our specialization and leadership in the M&A market, accompanying our clients in the most relevant transactions in the country, always remaining faithful to our style: hard work and full dedication to provide quality advice at competitive prices.

Spanish version

Guillermo Bueno – Araoz & Rueda

Guillermo Bueno, es socio de Araoz & Rueda desde 2021 y se incorporó a al departamento mercantil en 2013 tras cuatro años en el departamento de M&A de Uría Menéndez.
Guillermo tiene experiencia en el asesoramiento mercantil general a empresas nacionales y extranjeras. Está especializado en todo tipo de operaciones de compraventa de acciones, participaciones, inversiones y desinversiones, así como ofertas públicas de adquisición, joint ventures, reestructuraciones societarias y compraventa de activos, asesorando a clientes industriales y a entidades de capital riesgo, tanto desde el lado comprador como vendedor.

Asimismo, asesora recurrentemente a empresas de múltiples sectores (financiero, salud, telecomunicaciones, internet, inmobiliario, transporte, etc.) en materia societaria y de gobierno corporativo, y, en muchos casos, actúa como secretario del consejo de administración. Es Máster de Asesoría Jurídica de Empresas por el Instituto de Empresa (2009) y Licenciado en Derecho por la Universidad Pompeu Fabra (2007).

TTR: En el cuarto trimestre de 2020 el número de transacciones de M&A ha vuelto a los valores ‘prepandemia’, con un total de 639 deals. ¿Cómo interpreta esta tendencia al alza con respecto al segundo y tercer trimestre del año?, ¿qué perspectiva podríamos tener para 2021?

G. B.: Es una tendencia muy positiva. Creo que durante el segundo y tercer trimestre del 2020 la economía española estuvo noqueada por el impacto de la pandemia del COVID. Ello provocó la paralización de muchas operaciones de M&A que luego se reactivaron durante el último trimestre.

Además del efecto corrector anterior, las operaciones de M&A también se han reactivado porque actualmente existe mucha liquidez en el mercado y los tipos de interés están muy bajos, por lo que es relativamente sencillo obtener financiación para acometer las transacciones.

Por otro lado, el dato tan positivo del número de deals durante el último trimestre demuestra que las compañías españolas son muy atractivas para invertir. Tienen mucho potencial, buenos equipos directivos y capacidad de crecimiento e internacionalización.

Respecto al 2021, veremos cómo se asienta el Brexit y cómo evoluciona la pandemia. Espero que las vacunas hagan su efecto y durante el segundo semestre pueda estabilizarse el COVID sin que se produzcan rebrotes graves. En cualquier caso, creo que el mercado de M&A seguirá creciendo en España porque, como ya he dicho, tenemos buenas bases para ello. Se continuará contando con liquidez y los tipos se mantendrán bajos.

TTR: En cuanto a reestructuraciones societarias, ¿cuál es la situación actual y cuáles son las perspectivas para los próximos meses en España?

G. B.: Las compañías están estudiando el impacto que puede tener un efecto prolongado del COVID en los hábitos de consumo y necesidades de sus clientes, así como en el tejido empresarial español. Creo que, como resultado de lo anterior, las compañías deberán reestructurarse para dar respuesta a los cambios que puedan producirse en el mercado (invertir más en tecnología o la gestión de sus trabajadores por la incorporación paulatina del teletrabajo).

Actualmente estamos inmersos en ese proceso donde se están produciendo muchas reestructuraciones societarias para hacer más eficientes aún sus negocios y adaptarse a una nueva realidad que tenga en cuenta el impacto del COVID a largo plazo.

TTR: La inversión de fondos de capital riesgo y capital privado extranjeros en empresas españolas ha registrado una disminución del 18%, luego de cuatro años de crecimiento, ¿Que tendencia podría prevalecer en 2021 en estos segmentos?

G. B.: Creo que la disminución de estas inversiones ha sido provocada básicamente por la pandemia del COVID. Durante los tres primeros trimestres, los inversores extranjeros decidieron paralizar sus inversiones para ver cómo evolucionaba la economía española.

No obstante, creo que esta tendencia se corregirá y la inversión extranjera volverá a crecer durante el año 2021, sobre todo en determinados sectores como la energía, la tecnología y la salud. Actualmente tenemos mayor visibilidad sobre la pandemia del COVID, los inversores cuentan con liquidez y los tipos de interés están bajos. Todo ello, sumado a que los precios de las compañías españolas son muy razonables, incrementará la inversión extranjera en nuestro país.

TTR: España ha registrado un aumento del 3,48% en el número de operaciones de capital de riesgo, así como un aumento del 256,76% en el capital movilizado ¿Qué factores ocasionaron este crecimiento y cómo podría influir esta tendencia en las asesorías para el próximo semestre?

G. B.: Creo que el aumento de las operaciones de capital riesgo se explica principalmente por tres factores: en primer lugar, las empresas españolas son muy atractivas por su capacidad de expansión y lo bien gestionadas que están por sus equipos directivos. Tras las crisis del 2008, nuestras empresas se profesionalizaron y ahora son mucho más eficientes.

En segundo lugar, como ya he mencionado, los fondos de capital riesgo cuentan con mucha liquidez para invertir y los tipos de interés están muy bajos.

Por último, con motivo de la pandemia del COVID y la situación socioeconómica española, las compañías españolas tienen unos precios muy atractivos, lo que proporcionará grandes retornos en el futuro.

TTR: El sector inmobiliario continúa siendo el sector líder del mercado M&A en España: ¿Cuáles serán los principales motores de consolidación en este sector este año?

G. B.: Los sectores inmobiliarios en los que se prevé más actividad durante el 2021 serán: (i) el logístico, por el crecimiento sostenido de las ventas por internet; (ii) el hotelero y de hospitality en general, por la esperada reactivación de la actividad turística a lo largo del año y los probables ajustes que se producirán respecto de los precios previos de venta; y (iii) dentro del sector comercial, los parques de medianas, que también se verán beneficiados por el eventual aumento de la actividad.

TTR: Para Araoz & Rueda, ¿Cuáles podrían ser los principales retos en operaciones de M&A en España durante 2021?

G. B.: En Araoz & Rueda somos optimistas respecto a las operaciones de M&A durante el 2021.

Nuestro principal reto es seguir manteniendo nuestra especialización y liderazgo en el mercado de M&A, acompañando a nuestros clientes en las operaciones más relevantes del país, siendo fieles siempre a nuestro estilo: trabajo duro y dedicación plena para brindar un asesoramiento de calidad a unos precios competitivos.

Transactional Impact Monitor: Mexico – Vol. 3

Posted on January 12, 2021January 12, 2021

Transactional Impact Monitor: Mexico – Vol. 3

30 December 2020

TTR’s Transactional Impact Monitor (TIM) is a Special Report combining local knowledge and market visibility from top dealmakers developed to address extraordinary situations affecting the macroeconomic stability and M&A outlook in core markets

INDEX

– M&A Outlook
– Private Equity
– Capital Markets
– Handling the Crisis
– Dealmaker Profiles

There is no doubt that 2020 has been one of the most challenging years in Mexico for decades, made all the more difficult by the slow reaction and absence of mitigating measures provided by the government, in contrast to most other nations.

“Mexico has endured a deeper recession because we haven’t had the government support,” said Nexxus Capital Founder and Chairman of the Board Arturo Saval. “I’ve never lived through anything like this.” Several sectors have been put under enormous stress, he noted, none more so than the country’s normally booming hospitality industry.

If there’s any optimism in Mexico’s business community as 2020 draws to a close, it’s relative to the dire pessimism that pervaded at the close of the first quarter, said Creel, García-Cuéllar, Aiza y Enríquez Partner Eduardo González.

There was great uncertainty over how the markets would react, González recalled, and many transactions that were on the cusp of closing were suspended as a result, some led by financial sponsors that relied on credit lines with local banks, others that depended on international financing. International lenders froze loan processing for several months, putting deals that relied on debt on ice, González said.

Mexico’s private sector has been damaged, and the health of the country’s financial system remains precarious, said Saval. Of Mexico’s 51 banks, 25 will have a very hard time, and some will shut down for good, Saval predicted, which will put extra pressure on the large ones that remain, many of which are based overseas and are facing stress in their home markets as well. “There will be a lot of stress in the banking industry globally, which will make them reluctant to increase their exposure in Mexico,” he said.

The downturn has affected deals in a range of sectors, from construction to chemicals and consumer products, with some proving far more vulnerable than others, González said. “We saw up close people trying to get out of signed deals, invoking force majeure events or breach of contract,” he noted.

The uncertainty clouded financial projections, with no assurance that companies would be able to maintain their revenue and EBITDA margins in an unknown economic climate, he added. “Nobody thought they’d be able to maintain their sales volumes; nobody knew how the world economy would work with everybody being asked to stay at home.”

There are sectors that have been severely affected, but many continue operating and the fall in sales and profitability hasn’t been as devastating as anticipated, which has resulted in cautious optimism, González said.

Some industries have indeed been flourishing, Saval noted, with the surge in e-commerce bolstered by Mexico’s lag in this area pre-crisis. The country is underleveraged compared to many of its peers in Latin America and state finances are in good shape, with the exception of the country’s national oil company Pemex, “mostly because of the position the government has taken”, Saval added.

Investment in Mexico’s energy sector has been impacted by the policy position of the Andrés Manuel López Obrador (AMLO) administration, which eroded investor confidence in the renewable energy market and put a damper on reforms passed by his predecessor, González explained.

Nonetheless, there are still investors out there for good assets, he said, and many, like China’s State Power Investment, which bought wind farm operator Zuma Energía in November, are accustomed to regulatory and political risks. The policy position of Mexico’s current government has made the energy sector less attractive, but renewable deals still command interest, he said. Similarly, appetite for Mexico’s road infrastructure among Canadian pension funds has also held up, González said, as evidenced by the recent sale of IDEAL.

Investment in conventional energy, on the other hand, faces tremendous hurdles, González said. “It’s difficult to understand the intentions of the government in areas that they themselves have politicized,” he said. “AMLO has consistently tried to make the petroleum industry a sacred cow for the people of Mexico for many years, and decisions governing the sector won’t likely be made based on any market intelligence, nor geopolitics, but rather for his own political benefit,” he added.

M&A Outlook
… Click here to access the third issue of Transactional Impact Monitor: Mexico – Vol. 3.

Transactional Impact Monitor: Mexico – Vol. 3

Transactional Impact Monitor: Andean Region – Vol. 3

Posted on November 5, 2020November 5, 2020

Transactional Impact Monitor: Andean Region – Vol. 3

15 October 2020

INDEX

CHILE
– M&A Outlook
– Handling the Crisis

COLOMBIA
– M&A Outlook
– Handling the Crisis

PERU
– M&A Outlook
– Handling the Crisis

– Dealmaker Profiles

CHILE

The mood among investors in Chile, and those looking on from abroad at what has long been considered the darling of Latin America for its political stability and liberal trade policies, is tenuous. The plebiscite on constitutional reform, originally scheduled for April, will be held on 25 October, a year after protesters filled the streets of Santiago following a public transit hike to voice their discontent on a range of matters. Among the grievances that led to widespread unrest were human rights abuses, the exclusion of a large swath of the population from the economic gains the country has enjoyed over the last three decades, and a generalized disenchantment with Chile’s form of pro-business, neoliberal democracy.

The economic crisis that gripped the world in 1Q20 caught Chile, and much of Latin America, mid-downward cycle, noted Banmerchant Deputy Manager of Corporate Finance Ignacio Rodríguez. Like other investment banks across the region, Banmerchant had several sale processes underway that were put on hold, Rodríguez said, noting that as the M&A work began to decline, restructuring became the firm’s core business.

“Many companies stopped generating revenues, but their liabilities still needed to be serviced,” he said. Chile’s banks stepped up to support the private sector, funneling low-interest loans with extended grace periods before borrowers had to begin repaying. In September, those grace periods began to expire, Rodríguez said, and if corporate revenues don’t normalize in October and November, a wave of insolvencies will hit Chilean shores.

The uncertainty surrounding the economic recovery is complicated by the October plebiscite, which has investors, and Chileans in general, anxious. “Everybody wants to restructure their liabilities long-term, but many won’t be able to,” Rodríguez said. “They will either go under or seek fresh capital. That’s where M&A will reactivate, representing an opportunity for foreign investors to enter Chile at very low valuations.”

M&A Outlook
… Click here to access the third issue of Transactional Impact Monitor: Andean Region – Vol. 3

COLOMBIA

Restrictions governing economic activity in Colombia are easing with all businesses except bars, nightclubs and gyms permitted to open daily as of 22 September, though opening hours continue to be limited for specific sectors. Business confidence has accordingly turned slightly positive for the first time since March, according to the local press.

“We can now turn the page,” said César Gutiérrez, Managing Director of boutique investment bank Bastion Capital Advisors. After six months of near paralysis, the private sector is ready to get back to business, he said. Many Colombian companies in certain industries are entering restructuring processes, refinancing their debt, looking for capital or exploring sale options after six months of little-to-no business activity, however, he noted.

Tourism and hospitality and related industries like aviation and catering, have been decimated, said Gutiérrez, and automotive sales are also down sharply. Bastion was recently approached by a company serving the aviation industry that could not continue to finance its overhead when revenue fell flat, Gutiérrez said. Though Colombia’s international airports reopened on 1 September, traffic remains lackluster as the fear of contracting COVID-19 while flying persists, and many corporate entities maintain work-from-home policies, limiting the company’s prospects for a rebound, he noted.

There is no way to maintain fixed costs for five or six months when revenue evaporates overnight, Gutiérrez said, especially for companies that have relied on debt financing. Colombia’s banks have classified virtually every business segment as high-risk, meanwhile, making it difficult for companies to access bridge financing, Gutiérrez said.

This looks to be the start of a wave of consolidation, where private equity funds with firepower can buy on the cheap, he noted, whether diversified domestic fund managers that have longstanding interests in Colombia, or those that have always had an interest in investing in the country. A long-awaited opportunity for private debt could finally find fertile ground in Colombia, Gutiérrez noted.

Despite the uncertainty about the timing and speed of the recovery, there will always be appetite for good assets, Gutiérrez said. “When some cry, others make handkerchiefs,” he noted, citing a popular saying. This is the moment for opportunistic investors, both strategic and financial, he added. “I’m very optimistic. This has been a moment to reflect, to analyze where industries are headed, and understand the new opportunities; companies need to get ready for what comes next.”

M&A Outlook
… Click here to access the third issue of Transactional Impact Monitor: Andean Region – Vol. 3

PERU

Following months of strict isolation, the Peruvian government announced it would permit air traffic between Peru and seven countries, namely Bolivia, Chile, Colombia, Ecuador, Panama, Paraguay and Uruguay, beginning the first week in October. The reopening of the country’s airspace comes despite an official death toll attributed to SARS-CoV-2 that puts Peru at the top of the list of nations globally by a significant margin, at over 1,000 per million inhabitants. Despite the health crisis, Peruvian companies are beginning to get back to business, and stalled transactions are getting back on track, according to Hernández & Cía. Abogados Partner Diego Carrión.

Peru was awash with M&A deals in 2015, when Carrión was appointed partner. That wave of transactions hit a bump when the “Lava Jato” scandal in Brazil spilled over into Peru, where Odebrecht and other large Brazilian and Spanish construction firms had large contracts underway in partnership with local entities, many of them, it turned out, won by corrupt means.

The construction sector was paralyzed as a result of this, with project finance transactions arrested midstream. This was followed by some opportunistic M&A when Odebrecht and other large international construction firms needed to exit some projects, Carrión recalled, while M&A activity in other sectors of the economy continued at a good pace.

Hernández & Cía. Abogados was never involved with Odebrecht, which gave it a great upside, as many clients began to search the firm out for its clean record, said Carrión. Among the important new clients garnered as a result was Graña y Montero, Carrión noted. In 2017, the firm was retained by the company’s new board to guide it through a reorganization, and it has continued to work hand-in-hand with the board and the new management ever since to overcome one of the most dire corporate crises in the country’s history. “They sought us out for the strength of our team, and because we had no conflict of interest,” Carrión said, noting Hernández was part of the “big change” in the company.

The firm’s deal flow isn’t dependent on the construction industry, however, and it has worked on a slew of M&A deals in other sectors in recent years, including several led by private equity investors. Real estate is one sector in which it has invested heavily of late to enhance its expertise. In the midst of the crisis in mid-2020, it poached an entire real estate practice from another law firm to bolster its capabilities in this growing field.

“This gives us an edge amid strong growth in what has become an increasingly sophisticated real estate market,” Carrión said. Real estate lawyers need to speak the language of the engineers and regulators, and Hernández was losing some business without a clear leader in the space, he said. The runway in the real estate market is tremendous, with construction projects that were shut down in 2Q20 now getting underway again and a pipeline of deals spanning the economy, from the development of agricultural lands to malls. “We now have the capacity to ride this wave,” Carrión said, noting the firm took advantage of its strong balance sheet and the lull in the market to make a strategic move that will position it with the right team.

While construction projects in the private sector are underway again, the large infrastructure projects tendered by the Peruvian government, including Line 2 of Lima’s metro and the expansion of Jorge Chávez Airport, are progressing at a snail’s pace, Carrión said, amid bureaucracy that’s worse than ever, inducing skepticism, fear and a lack of confidence among participants and onlookers alike.

M&A Outlook
… Click here to access the third issue of Transactional Impact Monitor: Andean Region – Vol. 3