Buying a business is one of the fastest routes to growth — and one of the most consequential if approached without rigour. Unlike organic growth, an acquisition compresses years of development into a single transaction: customer base, team, processes, brand. The problem is that you acquire the liabilities, contingencies and problems the seller has had little incentive to resolve before going to market.
At BMC, we have advised over 200 buy-side transactions in Spain, from acquisitions of family-owned businesses by individual entrepreneurs to platform acquisitions by private equity funds. This guide covers the complete process from the buyer’s perspective: structure, tax, due diligence, financing and closing — without unnecessary simplifications and with the real numbers from the Spanish market.
Share Deal vs Asset Deal: The First Decision
Before making an offer, the buyer must decide what they are actually buying: the participations of the company (share deal) or the assets of the business (asset deal). This is the first structural decision and it has tax, legal and operational consequences that shape the entire transaction.
| Dimension | Share Deal | Asset Deal |
|---|---|---|
| Subject matter | Participations in the company | Selected assets and liabilities |
| Buyer taxation | No direct tax; inherits contingencies | VAT 21% on current assets; ITP on real estate (6–10%) |
| Seller taxation | Capital gains (individual: 19–28%; holding: 95% exemption if conditions met) | Corporate tax on difference between price and book value |
| Employees | Automatic subrogation (Art. 44 ET) | Automatic subrogation if productive unit transferred |
| Client contracts | Transfer automatically | Require individual assignment or notification |
| Licences and permits | Remain with the company | Must be applied for or transferred individually |
| Hidden liabilities | Buyer inherits all of them | Only those expressly assumed in the contract |
| Goodwill | No amortisable goodwill in individual accounts (only in consolidation) | Amortisable goodwill over 20 years at 5% p.a. (LIS) |
| Operational complexity | Low (single transaction) | High (asset-by-asset assignment) |
| Typical closing timeline | 4–8 weeks from LOI | 8–16 weeks from LOI |
The working rule: in transactions up to €20M where the business is a coherent unit with no known material liabilities, the share deal is the standard structure — approximately 75% of transactions in this segment in Spain. The asset deal makes sense when the buyer wants to select specific assets, the vendor company carries unquantifiable liabilities, or there are regulatory reasons making it impossible or undesirable to acquire the legal entity.
The 7-Phase Acquisition Process
Phase 1: Identification and Initial Approach (Weeks 1–4)
The search for a target can be active (the buyer has a defined profile and goes to market) or reactive (an intermediary — M&A boutique or investment bank — brings opportunities). In Spain, approximately 60% of mid-market transactions originate through intermediaries; only 40% are direct buyer-seller contacts.
Before beginning the search, the buyer must define: EBITDA or revenue size range, target sectors, geography, whether seeking a platform (first acquisition) or an add-on (business to integrate into an existing platform), and approximate maximum price. Without this profile, the search consumes resources without return.
The first contact typically involves a bilateral NDA — the confidentiality agreement — allowing the seller to share initial information without the buyer being able to use it competitively. Review that the NDA contains no overly broad non-solicitation or non-compete clauses: in transactions where the buyer has presence in the same sector, these provisions can constrain operations if the deal does not proceed.
Phase 2: Preliminary Information and NBO (Weeks 4–8)
Following the NDA, the seller provides an Information Memorandum (IM) — a document of 40 to 80 pages describing the business, its history, commercial model, financial position (last three years) and prospects. The IM is prepared by the seller’s adviser and, whilst containing real information, is written to present the business in its best light. The experienced buyer reads the IM looking for what it does not say, not what it says.
With the IM, the buyer prepares a Non-Binding Offer (NBO) setting out the indicative valuation range, general structural terms and proposed timetable. In a competitive process with multiple buyers, the NBO filters who advances to the next phase. In a bilateral negotiation, it marks the start of serious discussions.
Phase 3: Due Diligence (Weeks 8–16)
Due diligence is the process of verifying the information received. It covers four main areas: financial and tax, legal and corporate, operational and commercial, and — in certain sectors — technical or environmental. The buyer accesses the virtual data room prepared by the seller. Due diligence teams work in parallel: typically an audit firm on financial and tax matters and a law firm on legal matters. The cost of a complete due diligence for a transaction of €5M to €30M ranges from €30,000 to €150,000, depending on complexity and the number of subsidiaries.
See our dedicated guide on due diligence for the complete framework on what to prioritise and how to read the data room.
Phase 4: Letter of Intent (Weeks 12–14, Concurrent with DD)
The Letter of Intent (LOI) or Term Sheet records the parties’ agreement on principal terms before drafting the definitive contract. Although typically non-binding as to price and structure, it usually includes binding exclusivity provisions (the seller cannot negotiate with other buyers for the indicated period, typically 45 to 90 days) and, where agreed, break-up fee provisions.
Key elements to include in the LOI: price and adjustment mechanism (locked box or completion accounts), structure (share deal or asset deal), principal conditions precedent, exclusivity period and its duration, and break-up costs if applicable.
Phase 5: SPA Negotiation (Weeks 14–20)
The Sale and Purchase Agreement (SPA) is the acquisition contract. It is the central document of the entire transaction, and its negotiation can take as long as the entire preceding process. The most contested points are:
- Price and adjustment mechanism. Locked box (fixed price with a historical reference date) or completion accounts (post-closing adjustment based on a closing balance sheet). The locked box is cleaner for the buyer but transfers intervening period risk. Completion accounts are more complex but give the buyer greater comfort in transactions where working capital is volatile.
- Representations and warranties. The seller declares that the information provided is accurate and complete. If a contingency covered by a representation surfaces post-closing, the seller indemnifies the buyer. The scope, caps, baskets and duration of liability are the most intensely negotiated points.
- Conditions precedent. Regulatory approval (CNMC if turnover thresholds are exceeded), sector-specific authorisations, buyer financing.
- Working capital, debt and cash adjustments. The price is adjusted to ensure the buyer receives the business with a normalised level of working capital, free of net financial debt and with the appropriate cash balance.
Phase 6: Closing (Weeks 20–24)
Closing is when the transfer is formalised before a notary public (notario), the price is paid and the participations are delivered. In Spain, participations in a Sociedad de Responsabilidad Limitada (SL) transfer by public notarial deed and the transfer is registered in the Registro Mercantil. For a Sociedad Anónima (SA), share certificates transfer by endorsement or physical delivery.
If there are conditions precedent — such as CNMC clearance — there may be a period between signing the SPA and effective closing (signing and closing separated). During this period, the buyer typically holds information rights over the ongoing business.
Phase 7: Post-Acquisition Integration (Months 1–12)
The transaction does not end at the notary: it ends when the acquired business is integrated and operating under the new owner. Integration failure is the most frequent cause of value destruction in acquisitions. According to McKinsey, between 60% and 70% of M&A transactions fail to achieve expected value, and the primary factor is inadequate integration planning.
Buyer Tax Implications in the Share Deal
In a share deal, the buyer pays no direct acquisition tax: the fiscal burden falls on the seller. However, the buyer inherits the complete tax history of the acquired company, including contingencies from the preceding four financial years (the general statute of limitations period under Article 66 of the General Tax Law, LGT).
The tax elements the buyer must analyse during due diligence are:
Net operating losses carried forward (BINPs). Losses from prior years that the company has not yet offset are a tax asset for the buyer — they can be applied against future profits without time limit (Art. 26 LIS). However, if the acquisition results in a change of control exceeding 25% of the participation, and the company has acquired material assets or liabilities prior to the change, HMRC’s Spanish equivalent, the AEAT, may restrict the offset (Art. 26.4 LIS, the so-called anti-avoidance limitation). The tax due diligence must quantify these BINPs and assess the restriction risk.
Interest deductibility on acquisition financing. If the buyer finances the acquisition with debt, interest is deductible against corporate income tax, but subject to a cap: 30% of the fiscal EBITDA of the entity bearing the cost (Art. 16 LIS). Interest not deductible in a given year can be carried forward and deducted in the following 60 financial years. In LBO structures where the debt sits in a NewCo that subsequently merges with the target, the cap applies to the consolidated EBITDA of the group. Proper planning of the financing structure to maximise interest deductibility can translate to an effective price difference of between 3% and 8%.
Goodwill amortisation. In a standard share deal, no amortisable goodwill arises in the individual accounts of the acquired company — the difference between price paid and book value only appears in the group consolidation. However, if the acquisition is structured with a subsequent merger of buyer and target, a merger goodwill may arise that, under certain conditions, is amortisable for tax purposes at 1/20 per annum (5% annually, Art. 39.4 of the Spanish GAAP, PGC). Specialist tax advice determines whether this structure is viable and advantageous in any given transaction.
Financing the Acquisition
The financing options for a business acquisition in Spain fall into five categories, typically combined:
1. Buyer equity. The buyer’s own capital, with no interest cost but with an opportunity cost. In private equity transactions, equity represents 30–50% of the price; the remainder is debt.
2. Senior bank debt. Bank financing secured against the assets and cash flows of the acquired business. Banks typically lend up to 3–4x the target’s EBITDA. The most active banks in Spanish M&A financing are CaixaBank, BBVA, Santander and, for mid-market transactions, Bankinter and Sabadell. Approximate cost: EURIBOR plus 200–350 basis points.
3. Subordinated debt or mezzanine. Debt ranking below senior debt, with a higher cost (EURIBOR plus 600–900 basis points) but greater repayment flexibility. Common in complex LBOs where senior debt does not cover the full financing requirement.
4. Vendor loan. A loan from the seller to the buyer — the seller finances part of the price and receives it deferred. Common when the buyer lacks sufficient financing or when the seller wants to align incentives post-closing. In Spain, vendor loans typically represent 10–20% of the price, with terms of two to four years.
5. Earn-out as implicit financing. An earn-out is a mechanism whereby part of the price is contingent on post-closing performance targets. Although technically a price adjustment mechanism, in practice it functions as a payment deferral. The risk for the seller is that the targets are achievable under the new owner’s management — the seller must negotiate protective provisions preventing the buyer from obstructing achievement.
Typical LBO structure: the buyer incorporates a NewCo, which borrows (senior debt plus mezzanine) to acquire the target. After closing, NewCo and the target merge by absorption, so that the debt sits in the same entity that generates the cash flows to service it. This structure was controversial for years under the financial assistance prohibition (Art. 143 LSC), but since the 2014 reforms it is legal provided solvency conditions are met and the prescribed procedure is followed.
See our guide on valuations for how acquisition financing interacts with enterprise value calculations.
Due Diligence: What to Prioritise
Due diligence is not a bureaucratic document-collection exercise. It is a risk management process: the buyer seeks to quantify the uncertainties that the agreed price does not yet reflect.
Red flags that may be deal-breakers:
- Adjusted EBITDA materially below reported EBITDA (more than 20% difference without convincing explanation)
- Dependency on a single customer representing more than 40% of revenue without a formalised contract
- Employment or tax litigation with amounts exceeding 15% of the purchase price without adequate provisions
- Distribution, licence or agency contracts containing change-of-control clauses enabling automatic termination
- Key shareholders or directors without non-compete provisions or post-closing retention commitments
- Material discrepancies between the statutory accounts, tax returns and bank statements
Areas where buyers systematically underestimate risk:
Employment risk is the one that most frequently surfaces in the first weeks post-closing as a surprise. False self-employment arrangements, chains of fixed-term contracts that should have converted to indefinite employment, and discrepancies between an employee’s nominal job title and their actual functions generate claims that can emerge in the first year of management. A superficial employment due diligence that reviews only employment contracts without analysing actual working conditions is incomplete.
Intellectual property risk is another frequently underestimated point. If the business depends on software, brand, processes or content that is not registered in the company’s name — or was developed by employees or freelancers without a clear assignment of rights — the buyer acquires a legally fragile position over assets it considers central to the business.
Negotiation and Closing: Practical Considerations
Exclusivity: negotiate reasonable exclusivity periods but do not accept open-ended exclusivity. In competitive processes, the seller will attempt to maintain competitive pressure for as long as possible. 45 to 60 days of exclusivity is reasonable for a mid-market transaction; 90 days only if the complexity of due diligence justifies it.
CNMC clearance: if the transaction exceeds the notification thresholds (combined Spanish turnover exceeding €240M and each party with Spanish turnover exceeding €60M, or a market share exceeding 30%), prior notification to the CNMC is required. Phase 1 review takes one month; Phase 2 takes a further three months. Build this timeline into the closing schedule from the outset.
Warranty and Indemnity insurance: W&I insurance has been available in the Spanish market since approximately 2016 and has become standard in private equity transactions above €15M to €20M in price. It allows the seller to cap post-closing exposure by transferring risk to an insurer. Cost: approximately 1–1.5% of the cover amount.
Post-Acquisition Integration: The 100-Day Plan
The integration phase is where the return on investment is won or lost. A well-executed 100-day plan must cover:
Days 1–30 — Stabilisation:
- Communicate the transaction to employees, clients and suppliers with coordinated messaging
- Confirm the management team that continues (and on what terms)
- Maintain operational processes without abrupt changes
- Identify quick wins — efficiency improvements that require no cultural change
Days 31–60 — Operational integration:
- Integrate financial reporting systems (though not necessarily ERP systems)
- Implement the parent company’s policies (recruitment, procurement, expenses)
- Begin integrating functions that generate clear synergies (procurement, finance, IT)
- Start retention work on key people if not already resolved via earn-outs or contracts
Days 61–100 — Strategic orientation:
- First post-closing review of business plan vs IM projections
- Decisions on combined brand positioning (maintain, integrate or retire the acquired brand)
- Begin cultural integration: values, ways of working, decision-making criteria
- Review of medium-term organisational structure
Cultural integration is the least quantifiable factor and the one that most frequently explains acquisition failure. When the buyer does not understand — or does not respect — the culture of the acquired business during the first months, talent attrition can erase much of the value that justified the price paid.
For the First-Time Acquirer
If this is your company’s first acquisition, or your first time operating as a buyer, three practical recommendations before starting the process:
First, define precisely why you want to buy this specific business and what synergies you expect to generate — not in generic terms (“diversification”, “growth”) but quantified with a time horizon. If you cannot quantify the synergies, you cannot determine whether the price is reasonable.
Second, engage specialist advisers before making the first offer, not after. The cost of an M&A adviser (typically 1–3% of the price, with a minimum of £50,000 to £100,000) is recovered many times over if it prevents a poorly structured transaction or a badly negotiated price.
Third, read this guide alongside our dedicated article on due diligence and our M&A overview to understand the complete process from both perspectives. If you are thinking of selling in the future, also review our guide on how to prepare your business for sale — proper vendor preparation has a direct impact on the quality of information the buyer receives and, consequently, on the safety of the transaction.
If you are considering an acquisition in Spain, speak with our M&A team. We assess transaction viability, structure the financing and accompany you from first conversation through to closing and integration. For an integrated view of price, structure and financing, our tax planning team works alongside M&A from the outset — not as an afterthought.
