The Spanish M&A market recorded approximately 3,200 transactions in 2023 — down roughly 15% from the 2021 record but broadly in line with the ten-year historical average. As we move through 2024, the market has largely completed its recalibration from the zero-rate era: valuations have adjusted, debt is more expensive but available, and corporate activity is beginning to pick up, led by strategic buyers with accumulated liquidity.
The Macroeconomic Context and Its Effect on Valuations
The European Central Bank’s rate-hiking cycle — which took the reference rate from 0% to 4.5% between July 2022 and September 2023 — fundamentally altered the environment for private equity and financial buyers. The cost of acquisition debt, which in 2021 sat at EURIBOR plus 400-450 basis points, exceeded 700-750 basis points for leveraged buyouts (LBOs) through much of 2023. This compression of returns forced buyers to lower entry multiples.
In 2024, as ECB rate-cut expectations gradually materialise, the market anticipates a slow recovery. That said, EV/EBITDA multiples for undifferentiated businesses have stabilised in the 5.5x-7.5x range — well below the 2021 peaks. Businesses with high revenue recurrence, contract visibility and low working capital risk continue to command 9x-12x EBITDA, particularly in health technology, B2B software and waste management.
The Most Active Sectors in 2024
Technology and software: SaaS businesses with annual recurring contract structures remain the most sought-after targets for growth funds and international strategic buyers. Valuations increasingly use the ARR (Annual Recurring Revenue) multiple, with 3x-6x ARR multiples applied to companies growing above 25% annually.
Healthcare and life sciences: The consolidation of dental clinic chains, diagnostic centres and care homes continues to drive M&A in Spain. Platform players such as Sanitas, DomusVi and Quirónsalud have led the consolidation wave, and in 2024 greater activity is expected in the mid-market segment (EBITDA of €3-10 million), where fragmentation remains significant.
Infrastructure and renewable energy: The energy transition is fuelling demand for photovoltaic, wind and battery storage assets. Long-horizon buyers — infrastructure funds and European utilities — are paying 12x-16x EBITDA multiples for assets with long-term PPA contracts, given the cash-flow visibility.
Business services: Consolidation of advisory groups, HR consultancies, specialist law firms and facility management companies generates a steady deal flow in the €5-30 million enterprise value range.
Dominant Valuation Methodologies in the Current Market
DCF (Discounted Cash Flow) analysis has regained prominence as the primary valuation method, having lost ground to trading multiples during the zero-rate cycle. With discount rates (WACC) for Spanish mid-market companies now running between 9% and 13%, overly optimistic growth projections can no longer sustain premium valuations.
Comparable company multiples remain the reference point for anchoring price in negotiations, but buyers and their advisers are applying more rigorous scrutiny to peer selection and to adjustments for liquidity, size and company-specific risk. The illiquidity discount for private companies has normalised in the 20%-35% range versus listed comparable values.
Precedent transaction analysis reflects the market’s correction: deal databases for 2023 show discounts of 10%-20% versus equivalent 2021 transactions, particularly in retail, hospitality and consumer services.
Deal Structuring Trends
Faced with a persistent valuation gap between buyers and sellers, advisers are increasingly turning to risk-sharing mechanisms. Earn-outs — deferred payments contingent on future EBITDA or revenue targets — have become standard practice, representing 15%-30% of total deal consideration in many transactions.
Vendor loans, practically absent in Spain before 2022, are now a common bridge when buyers need to reduce the initial cash outlay. Similarly, seller reinvestment in the post-closing equity structure (rollover equity) is increasingly prevalent in private equity transactions, aligning incentives and helping close the valuation gap.
Outlook for the Second Half of 2024
Leading indicators point to a market reactivation in the second half of the year. The deal pipeline at exclusivity stage tracked by several M&A advisers in Spain is significantly above the levels seen at the end of 2022. Spanish and international private equity funds have accumulated an estimated dry powder of over €8 billion targeted at Iberian assets, representing sustained structural buying pressure.
The reduction in rate uncertainty — with the ECB cutting in June 2024 — will improve LBO financing conditions and should narrow the buyer-seller price gap. Corporate M&A activity from large listed companies will also contribute: several IBEX 35 companies have announced portfolio reviews with potential disposals of non-core divisions.
At BMC we advise on company sale and acquisition processes across Spain, with specialist teams covering valuation, due diligence and deal structuring. See our corporate advisory services.
