M&A in Spain: Different Types of M&A

Merger

A merger takes place when two independent companies create a completely new one that did not exist beforehand (Articles 5032 Paragraph 1 and 5034 Paragraph 1 of the Spanish Law on the Protection of Competition (Law Nr. 15/2007)).  Merger through takeover also exists. In this case, a company will be taken over by another one, and the latter retains its legal personality.

Acquisition

An acquisition requires a lasting and durable change in the control of the concerned company.  The change is lasting when it takes eight to 15 years after the closing of the acquisition.

Exclusive control of a company will then be assumed when a company exercises exclusive influence over another company or has such a possibility. There are two kinds of exclusive control:  positive and negative.  Positive exclusive control occurs when the acquirer has the majority of voting rights and can therefore actively influence the acquired company’s strategic decisions.  Negative exclusive control occurs when the acquirer has a right of veto regarding company decisions, but he or she cannot impose it.

Joint control exists when several companies can exercise exclusive influence over the acquired company.  Contrary to exclusive control, where only one shareholder exercises deciding influence, joint control is characterised by the influence of several companies so that a blocked situation may occur.

Change in the Nature of the Control

The change in the nature of the control is also considered a transaction from a competition point of view.  This happens when the company changes from exclusive to joint control.  This is the case when the number of management stockholders rises or their identity changes.

Some transactions are NOT considered a change in nature of control:  the change from negative exclusive control to positive exclusive control; the joining of a third acquirer; and no change in powers of attorney.

Joint Venture

The creation of a joint venture is taken into account when the company is of a lasting nature and fulfils all functions of an independent economic unit.  The main prerequisite is the full functionality of the company; it must be able to operate in a market.  In particular, the company must have management that is competent in the running of daily affairs and access to sufficient financial and human resources and assets.  Thus, an entrepreneurial activity can develop on a stable basis.  The personnel doesn’t need to be named straight from the joint venture.

An economic unit does not imply complete actions if it only practices a particular side activity as part of a parent company with no access to the relevant market.  An example of this is a company that exclusively does business in the research and development field or produces and distributes a parent company’s product.

For additional information regarding the types of mergers and acquisitions,