The Spanish M&A and private equity markets demonstrated strong resilience throughout 2025, continuing the recovery trend that began in the second half of 2024. Market activity accelerated significantly during the year, supported by improved financing conditions, greater investor confidence, increased availability of capital and sustained interest from international investors.

According to Mergermarket data, Spain recorded 640 private equity-related transactions in 2025, representing a 7% increase compared with 2024, while aggregate deal value reached EUR56.9 billion, an increase of 83% year-on-year. Cross-border investment remained the principal driver of market growth, with 432 cross-border transactions completed during the year and aggregate cross-border deal value increasing from EUR28.9 billion to EUR53.6 billion. The increase in transaction value was particularly notable in the mid-market and large-cap segments, reflecting a more favourable environment for strategic acquisitions and sponsor-backed transactions.

The Spanish Venture Capital and Private Equity Association (SpainCap) reported, regarding 2025, that the total private equity and venture capital investment in Spain grew by 1.8% in value compared with 2024, while the number of investments rose by 5.5% year-on-year, reflecting the sustained financing capacity of the sector for Spanish companies. Activity intensified in the second half of 2025, reflecting the progressive improvement in market conditions and the sector’s capacity to adapt to a complex operating environment. International fund managers recorded a historic high in the number of investments completed in Spain (representing a 63% increase compared with 2024), although the aggregate amount invested by international managers declined by 4%, confirming Spain’s continued position as an attractive destination for international private equity capital.

The major transactions completed in 2025 reflect the active participation of fund managers originating from, among other jurisdictions, France, the United Kingdom, the United States, Belgium and the United Arab Emirates. Venture capital investment reached approximately EUR2,125 million across approximately 779 investments (representing increases of 57% and 3% respectively compared with 2024), driven by the recovery of mega-rounds (in excess of EUR100 million) together with numerous rounds exceeding EUR10 million, propelling venture capital investment volumes to levels only surpassed in 2021 and 2022. By market segment, the mid-market was the principal driver of investment growth in 2025, with particular strength in later-stage start-up investments, while the large-market segment (transactions exceeding EUR100 million) declined by 31% in volume terms compared with 2024, with ten large-cap transactions closed during the year – including, among others, Seidor (Carlyle), EYSA (Tikehau Capital), Serveo (Portobello), Proeduca (Portobello/Sofina), Nuzoa (PAI Partners), 3A3EL (Mubadala), SVMYRoad (Bridgepoint), Grupo Alacant (Investindustrial) and Metrodora (Charterhouse). Industry, ICT and services were the preferred sectors for private equity and venture capital investment in 2025.

According to the abovementioned SpainCap data, fundraising by Spanish private fund managers reached approximately EUR2,271 million in 2025, representing a decline of 8% compared with 2024 but constituting the second-highest figure in the historical series, supported by the positive returns generated by the sector, the contribution of continuation funds and the continued support of public fund-of-funds programmes (ICO/Axis, CDTI, Cofides and FEI). As at 31 December 2024, Spanish national private fund managers had approximately EUR8,000 million of dry powder available for investment. Divestment activity remained robust, with divestments at cost reaching approximately EUR3,739 million in 2025 (a 2% increase compared with 2024) across approximately 361 individual divestments. Sales to third parties accounted for 56% of total divestment volume (a historical maximum for the series), followed by secondary buy-outs (sales to other private equity entities) at 20%. The middle market segment was a notable driver of divestment activity, with 46 middle-market exits recorded compared with 29 in 2024, reflecting increased portfolio rotation across the Spanish sponsor community and improving exit conditions.

These figures should be interpreted with caution, as Mergermarket and SpainCap apply different methodologies, scopes and reporting criteria when compiling transaction data, which may result in variations between the statistics reported by each source.

The outlook for the Spanish private equity market remains positive, supported by continued international investor interest, improved financing conditions and a more favourable macroeconomic environment. Sponsors continue to focus on active portfolio management and operational value creation as key drivers of returns in an increasingly competitive investment environment.

The positive outlook for the Spanish private equity market is also supported by the continued expansion of private credit as a flexible source of acquisition financing and by the growing use of continuation funds, which are increasingly providing sponsors with additional liquidity options and longer value-creation horizons for high-performing portfolio assets. Both trends have become structural features of the market and are expected to continue shaping investment and exit strategies in the coming years.

Sector Activity

Energy remained one of the most significant sectors in the Spanish M&A market in 2025, reflecting the continued attractiveness of Spain’s renewable energy platform to both domestic and international investors. The sector benefited from sustained investment in renewable generation assets and energy transition projects, as well as continued corporate activity involving major energy groups. In addition, growing investor interest has extended beyond traditional renewable generation assets to battery energy storage systems (BESS), standalone storage projects and regulated or quasi-regulated grid-related infrastructure. These asset classes have increasingly attracted both strategic and financial investors, driven by the need for greater system flexibility, grid modernisation and the continued integration of renewable generation capacity into the Spanish electricity market. SpainCap estimates that overall private equity and venture capital investment in Spain reached approximately EUR6.4 billion in 2025 across 828 investments, reflecting the resilience of the Spanish market despite continued geopolitical uncertainty and a challenging macroeconomic environment.

From a private equity and venture capital perspective, SpainCap’s 2025 data indicates a somewhat different sectoral profile. Industry, ICT and Internet, and Services were among the most active sectors for private capital investment during the year, both in terms of investment activity and number of transactions.

More broadly, recent geopolitical developments and macroeconomic factors have continued to influence investment activity. While uncertainty arising from international conflicts and global trade tensions contributed to longer deal execution periods and increased selectivity among investors, improving financing conditions, successive interest rate reductions and abundant liquidity supported a recovery in transaction activity during the second half of 2025. Private equity sponsors continued to focus on businesses demonstrating resilient earnings, scalable growth and recurring revenue streams, with particular interest in technology, healthcare, industrial businesses and selected service sectors.

In parallel, the aerospace/defence sector emerged as an increasingly important area of transactional activity, supported by heightened geopolitical tensions and increased defence spending commitments across Europe, a trend that is expected to remain relevant in 2026. Beyond traditional defence contractors, investor attention has increasingly focused on companies active in dual-use technologies, cybersecurity, aerospace components and advanced manufacturing. The prospect of sustained increases in defence budgets across Europe, together with broader strategic autonomy initiatives, is expected to continue supporting transaction activity and private capital deployment in the sector.

From a broader private equity perspective, global investor appetite has continued to concentrate on sectors offering resilient business models, recurring revenue streams and comparatively lower capital expenditure requirements. Globally, financial services and technology/telecommunications have remained among the sectors most attractive to private equity sponsors, reflecting wider international investment trends that are also influencing transaction activity in Spain.

Macroeconomic and Geopolitical Context

The geopolitical backdrop – encompassing the ongoing conflicts in Ukraine and the Middle East – and the prevailing macroeconomic uncertainty continued to influence the pace of investment throughout 2025, although the market demonstrated a progressive capacity to adapt to this complex environment, with activity intensifying in the second half of the year as economic conditions improved. The most significant macroeconomic risk factor identified by market participants relates to potential EU-US trade measures and tariff impositions. Uncertainty surrounding the introduction of tariffs on EU exports to the United States, ultimately resulting in the establishment of a 15% tariff ceiling for most exports under the EU-US trade agreement of July 2025 (as detailed by the European Commission). The EU-US trade deal began to affect transaction structuring and documentation, particularly in sectors with material transatlantic supply chains or revenue exposure. At a global level, according to the last SpainCap report, the M&A market recovery in 2025 was driven by large-scale transactions supported by economic stability, elevated equity market valuations and abundant liquidity, while the number of transactions declined as activity concentrated on strategic or higher-quality assets in a context of longer deal processes.

The progressive reduction in ECB reference interest rates from mid-2024 has been a positive structural driver for the Spanish market, improving financing conditions, supporting deal economics and contributing to the recovery in deal volumes observed in the second half of 2024 and in 2025. Against this backdrop, sponsors globally have placed an increasing emphasis on active portfolio management and operational value creation as the primary means of sustaining returns in an uncertain and competitive environment.

Structural Modifications – Royal Decree-Law 5/2023

Royal Decree-Law 5/2023, which entered into force on 29 July 2023, introduced a significant reform of the Spanish regime governing structural modifications – including cross-border and domestic mergers, spin-offs, conversions and global asset transfers. Of particular practical relevance to private equity, the reform clarified that expert reports required in leveraged post-acquisition mergers are no longer required to address the question of whether the merger constitutes financial assistance, thereby reducing execution risk, advisory cost and timing uncertainty in the implementation of LBO holding structures. This development has been broadly welcomed by the market and has materially simplified the post-acquisition reorganisation process in leveraged buy-outs.

Foreign Direct Investment Screening

Foreign direct investment screening pursuant to Royal Decree 571/2023 and Law 19/2003 has become an increasingly central element of transaction planning in Spain. The regime requires prior administrative authorisation where non-EU/non-EFTA investors (and, in specified circumstances, EU/EFTA investors with a non-EU/non-EFTA ultimate beneficial owner) acquire stakes of 10% or more (or otherwise acquire effective control) in Spanish companies operating in defined strategic sectors, where the investment value exceeds EUR1 million. Investments completed without the required authorisation are null and void. In 2025, 196 transactions were submitted for prior authorisation (a 19% increase compared with 2024). Of the 181 transactions reviewed by the Foreign Investment Board (JINVEX), 116 were authorised without conditions, 14 were authorised subject to commitments and no transaction was prohibited.

EU Foreign Subsidies Regulation

Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market introduces a mandatory notification and approval regime for concentrations where combined aggregate EU turnover exceeds EUR500 million and foreign financial contributions exceed EUR50 million. For PE-led acquisitions meeting these thresholds, the FSR introduces additional diligence obligations regarding foreign financial contributions received by the target group and a potential additional pre-closing regulatory approval, increasing deal complexity and execution timeline risk.

Energy Sector Regulation

In the energy sector, regulatory developments aimed at mitigating the impact of the conflict in Ukraine and promoting the transition to renewable energy have continued to affect the operating environment of portfolio companies active in this sector, and sponsors should monitor ongoing legislative and regulatory developments in this area.

ESG and Sustainable Finance

ESG due diligence and reporting obligations continue to evolve across the EU. ESG considerations are increasingly integrated into the due diligence process and reflected in tailored representations, warranties and seller undertakings in transaction documentation. The Corporate Sustainability Reporting Directive (CSRD) has begun to apply to large undertakings from financial year 2024, with its scope progressively extending to listed SMEs. Private equity sponsors are also closely following the European Commission’s Omnibus package, which may recalibrate certain ESG reporting and sustainability due diligence requirements. While the direction of travel towards greater sustainability disclosure remains unchanged, the proposed reforms are intended to simplify compliance obligations.

Merger Control – CNMC

The principal Spanish competition regulator for merger control purposes is the National Markets and Competition Commission (Comisión Nacional de los Mercados y la Competencia, or CNMC). Merger control filings are required where a concentration meets the applicable Spanish filing thresholds, including where: (i) as a result of the transaction, the parties acquire or increase a market share of 30% or more in a relevant product and geographic market in Spain (subject to certain statutory exceptions); or (ii) the aggregate turnover in Spain of the parties exceeds EUR240 million and at least two of the parties each generate Spanish turnover of more than EUR60 million.

Merger control analysis is routinely undertaken at an early stage of private equity transactions, particularly in concentrated sectors or regulated industries. CNMC clearance is commonly included as a condition precedent in the SPA, with the parties allocating regulatory risk through tailored efforts undertakings and termination provisions. The CNMC has also shown increasing interest in reviewing the competitive effects of non-traditional transaction structures, including significant minority shareholdings and strategic partnerships that may give rise to competition law concerns notwithstanding the absence of a full change of control.

The increasing frequency of transactions requiring multiple regulatory approvals – including merger control, FDI screening and the EU Foreign Subsidies Regulation – has reinforced the importance of comprehensive regulatory assessment at the outset. This trend has increased the need to align transaction timetables with regulatory approval processes and to provide for a carefully structured interim period between signing and closing.

Foreign Investment Screening – FDI Regime

As described above, FDI screening pursuant to Royal Decree 571/2023 and Law 19/2003 is a central compliance consideration for PE-backed buyers in Spain. Non-compliant investments remain null and void until authorisation is obtained, and compliance with the regime must be confirmed at an early stage of every relevant transaction.

Where sovereign wealth funds participate as sponsors or co-investors, their involvement is subject to enhanced regulatory scrutiny under the FDI regime. Deal teams should assess any sovereign wealth fund co-investment at the earliest practicable stage, with particular attention to the ultimate beneficial ownership and the applicable sector classification of the target.

EU Foreign Subsidies Regulation

The FSR regime is relevant for PE-led transactions in Spain where the applicable thresholds are met. In practice, sponsors must build FSR diligence steps into the acquisition process and, where a notification is required, accommodate potential European Commission review as an additional pre-closing condition.

Anti-Bribery, Sanctions and ESG Compliance

Anti-bribery and corruption compliance – under Spain’s Criminal Code (and, where applicable, the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act) – has remained a standard component of legal due diligence in PE transactions, with compliance assessments and targeted representations forming part of standard SPA warranty packages.

Sanctions compliance has assumed increasing prominence in the context of the continued expansion of EU, UK and US sanctions regimes. Deal teams are expected to conduct rigorous screening of the target group and its principal counterparties at an early stage of the transaction.

From an ESG perspective, sustainability compliance has increased considerably in practical importance, with ESG considerations now integrated into due diligence and transaction documentation, and portfolio companies subject to progressively more extensive reporting obligations under applicable EU legislation.

Legal due diligence in Spain is typically comprehensive in private equity transactions, conducted through a structured information request process with documents uploaded to a secure virtual data room, followed by written Q&A sessions and, in larger transactions, management presentations. In PE buy-outs, legal due diligence is typically extensive (covering financial, legal, tax and labour workstreams simultaneously); in venture capital transactions, the depth tends to be more limited.

Beyond traditional legal workstreams, there has been a significant increase in the scope of compliance, ESG, AI, cybersecurity and reputational due diligence conducted in connection with PE transactions, reflecting both the evolving regulatory environment and the demands of lenders and limited partners.

Key areas of legal due diligence focus include: (i) title to shares and assets; (ii) material contracts (including change-of-control provisions); (iii) regulatory licences and permits; (iv) employment and labour matters; (v) intellectual property; (vi) litigation and contingent liabilities; (vii) data protection and cybersecurity; (viii) real estate; (ix) environmental matters; and (x) compliance (including anti-bribery, sanctions and ESG).

Identified legal contingencies are managed through the SPA – principally through tailored warranties and specific indemnities for contingencies that have been identified and quantified – and in some cases through agreed pre-closing or closing actions, such as corporate reorganisations, regulatory filings or the resolution of identified litigation, where the matters concerned are sufficiently material to warrant such treatment as a condition to completion.

Vendor due diligence is an established feature of the Spanish PE market, particularly in competitive sale processes, where the seller commissions a review designed to provide bidders with a structured overview of the target and to pre-empt material issues. In larger auction processes, vendor due diligence reports are frequently used to support buy-side warranty and indemnity (W&I) insurance solutions, with insurers relying on the seller’s diligence work supplemented by targeted buyer and insurer diligence.

Sell-side legal VDD reports in Spanish auctions address the principal areas of legal due diligence (corporate, commercial contracts, employment, regulatory, litigation, IP, real estate and data protection), with a focus on issues of materiality to prospective purchasers. In larger processes, sell-side legal VDD is typically conducted alongside financial, tax and commercial VDD.

As regards reliance, Spanish market practice varies. In some processes, sell-side VDD reports are provided on a non-reliance basis; in others, direct reliance may be offered to the successful bidder at a later stage, subject to agreed limitations on the adviser’s liability.

Private equity acquisitions in Spain are predominantly structured as privately negotiated share purchase agreements. Court-driven processes are generally confined to insolvency scenarios, and tender offers (OPAs) apply to listed company acquisitions. SPAs are normally executed as notarial deeds before a Spanish notary public – obligatory for share transfers in a sociedad de responsabilidad limitada (SL) – conferring enhanced evidential and enforcement characteristics.

Transaction processes may be bilateral or competitive (auction) depending on the size and characteristics of the target: mid-market and large-cap transactions are typically conducted as controlled auctions managed by the sell-side financial adviser (which strengthens the seller’s negotiating position and results in more seller-favourable documentation), whereas small-cap transactions tend to be structured as bilateral negotiations, affording buyers greater flexibility in documentation terms.

The number of PE transactions conducted through competitive auction processes has moderated since 2022. Recent market activity suggests a degree of preference for bilateral processes, particularly where a PE sponsor is acting as buyer, as these may offer greater transaction certainty and process control.

PE-backed acquisitions in Spain are typically structured through a Spanish-law special purpose vehicle, most commonly an SL, providing limited liability, structural flexibility and capital efficiency. It is unusual for the fund entity itself to be a direct party to the acquisition documentation. The fund typically provides an equity commitment letter confirming its commitment to fund the equity portion of the purchase price at closing; in some transactions, the fund may also provide a guarantee or limited recourse support in favour of the seller.

Where an international investor base or a particular financing structure so requires, a holding structure incorporating a Luxembourg or Dutch intermediate holding vehicle above the Spanish SPV is sometimes employed.

Private equity transactions in Spain are commonly leveraged, funded through a combination of equity (contributed by the sponsor and, where applicable, management) and third-party debt (typically senior bank credit facilities, unitranche or private credit), and in some cases mezzanine or vendor loan components. It is standard practice for lenders to require access to due diligence materials, and lender commitment letters are typically conditioned upon satisfactory diligence outputs. Private credit has continued to strengthen its position within the Spanish acquisition finance market, particularly in mid-market and upper mid-market transactions. Direct lenders offer financing solutions characterised by greater execution certainty, structural flexibility and speed of deployment. Unitranche facilities have remained particularly attractive in sponsor-backed acquisitions. The growing presence of private credit funds has broadened financing options and has become an important driver of transaction activity.

In addition to private lenders, public entities (including the CDTI, Cofides and ICO-Axis) and European funds (including the Next Tech programme) play a meaningful role in supporting VC and PE activity in Spain, and in facilitating the fundraising of GPs through public-private collaboration arrangements.

Sellers in auction processes typically require bidders to demonstrate “certain funds” or to provide comfort on the availability of financing. In practice, this is achieved through: (i) a signed equity commitment letter from the fund (or its GP); and (ii) signed lender commitment letters confirming the terms of the debt financing. Where the buyer is an SPV, sellers commonly require a commitment letter from the fund parent confirming the availability of both equity and debt.

According to the last SpainCap report, in 2025, fundraising by Spanish private managers reached approximately EUR2,271 million – the second-highest figure in the historical series – supported by the contribution of continuation funds and the sustained commitment of public fund-of-funds programmes to the development of the Spanish private capital market.

Multi-sponsor PE consortia remain relatively uncommon in Spain, save in large-cap transactions requiring equity commitments exceeding a single fund’s capacity. Co-investment alongside the lead sponsor is more frequently observed in venture capital than in traditional PE buy-outs; in buy-out structures, co-investors generally hold minority stakes with limited governance rights. PE/corporate investor consortia are less frequent, reflecting the tension between PE sponsors’ financial value creation objectives (typically on a three- to six-year horizon) and corporate investors’ longer-term strategic objectives; where such arrangements are agreed, governance, exit and tag/drag provisions require careful tailoring.

At a global level, PE firms engaging in cross-border or multi-investor strategies frequently adopt an opportunistic approach, with the added complexity and cost of compliance, cash repatriation and governance structures across multiple jurisdictions requiring careful management.

The predominant pricing mechanisms in Spanish private equity are the locked box and the completion accounts structures, with fixed-price mechanisms also used in certain transactions. The locked box remains the most frequently used pricing structure and is particularly prevalent in seller-driven auction processes, where the seller has a strong preference for price certainty and a clean economic outcome. Hybrid structures – combining locked-box mechanics with limited completion accounts adjustments – have gained traction in the market as a pragmatic response to situations in which a full locked box is not achievable.

Earn-outs, deferred consideration and roll-over equity structures are relatively common, particularly where a valuation gap exists, where continued involvement of founders or management is essential, or where forward-looking performance metrics are the most relevant pricing indicator. The increased use of earn-out arrangements has been accompanied by increased litigation, particularly regarding the interpretation of performance metrics and the accounting principles applicable to their calculation. In controlling interest acquisitions by a PE sponsor, roll-over of the vendor’s proceeds by way of reinvestment into the acquirer’s vehicle is a frequently encountered feature.

The involvement of a PE fund as seller generally results in a strong preference for locked-box mechanics – supporting a clean and certain exit – and resistance to earn-out provisions, which are perceived as creating continuing economic exposure and management complexity post-exit that is inconsistent with the clean-exit rationale.

In locked-box structures, it is common for sellers to seek a “ticking fee” – in the form of an agreed daily or monthly interest accrual on the equity price – from the locked-box date to the date of closing, compensating the seller for the time value of money and for the economic benefit passing to the buyer from the locked-box date. The inclusion and rate of the ticking fee is, however, subject to negotiation and is more consistently seen in larger-cap transactions. Leakage is conventionally remedied on a euro-for-euro price reduction basis, without interest, and the charging of interest on leakage amounts remains uncommon in the Spanish market, though both equity tickers and leakage interest are features progressively gaining traction as international deal practice influences the domestic market.

It is standard practice in Spanish PE transactions to include a dedicated dispute resolution mechanism for consideration-related disputes. The typical mechanism provides for: (i) a period of good faith negotiation between the parties following notification of the dispute; and (ii) failing resolution within the agreed period, referral of the dispute to an independent expert – most commonly an international “Big Four” audit firm or a reputable independent accounting expert – whose determination is final and binding on the parties, subject to limited exceptions for manifest error or wilful default. Ordinary court and arbitration proceedings are typically excluded from the scope of the expert determination mechanism, save in cases of fraud or gross negligence. For locked-box transactions, disputes most commonly relate to the characterisation of items as “leakage” or “permitted leakage”; for completion accounts, disputes typically concern the accounting treatment of specific items and the application of agreed accounting policies.

Conditionality in Spanish PE transactions is primarily driven by regulatory approvals – in particular merger control clearance (CNMC and/or European Commission) and, with increasing frequency, FDI authorisation. Additional conditions commonly seen include: (i) financing conditions (generally not accepted in competitive auction processes conducted on a “certain funds” basis); (ii) third-party change-of-control consents; (iii) pre-closing corporate reorganisations or carve-outs; (iv) key management retention; and (v) antitrust clearance in other relevant jurisdictions.

Material adverse change conditions have historically been relatively uncommon in Spanish PE transactions. Where included, MAC provisions tend to be narrowly drafted, subject to seller-friendly carve-outs for general economic, industry-wide or geopolitical disruption. In 2025, however, there has been a notable increase in MAC provisions specifically addressing the potential adverse impact of US tariff policies, particularly in sectors with material transatlantic supply chain or revenue exposure.

Private equity buyers in Spain are generally reluctant to accept unconditional “hell or high water” undertakings, particularly where regulatory clearance risk is material. Sellers have increasingly sought to transfer regulatory execution risk to the buyer, requiring the buyer to commit to taking all steps necessary to obtain approvals, subject to a negotiated carve-out for disproportionately burdensome remedies.

In practice, a distinction is drawn between merger control undertakings (where buyers are more willing to commit to extended effort obligations) and FDI authorisation (where the scope of potential conditions is less predictable). As regards the EU FSR regime, PE buyers typically seek to exclude FSR remedy risk from any broad “hell or high water” commitment.

In transactions subject to conditions precedent, the parties may agree on break-up fee provisions, whereby contractual payment obligations may be imposed on the seller (or, in the case of a reverse break-up fee, on the purchaser) in the event that the transaction is not completed. These fees are normally connected with specific termination or breach events previously agreed by the parties.

In Spanish PE deals, break-up fees and reverse break-up fees are highly infrequent. Sellers tend to resist granting termination rights other than those expressly reflected in the SPA through the agreed conditions precedent. However, it is common for the parties to reserve their rights to claim damages in the event of a breach of obligations relating to the satisfaction of conditions precedent.

Where break-up fees and reverse break-up fees are included, the amount is generally linked to the purchase price and determined on a case-by-case basis. Depending on the transaction, the fee can either be set at a substantial level, not going above 15% of the purchase price, or remain largely nominal, such as at 1% of the purchase price.

The most common basis for terminating a SPA is the failure to satisfy the agreed conditions precedent by the applicable longstop date. Parties will generally seek to co-operate and find a mutually acceptable solution, particularly where the outstanding conditions are capable of being remedied. Termination is more frequently seen where a required regulatory authorisation is refused or cannot be obtained within the agreed timeframe.

The agreement may also provide for termination rights in the event of a material breach by either party, the occurrence of a specifically negotiated material adverse change (MAC) event, or the inability of a party to fulfil its pre-closing obligations. While MAC provisions have historically been relatively uncommon in Spanish private equity transactions, tailored MAC clauses addressing specific sectoral, regulatory or geopolitical risks have become increasingly common.

The length of the longstop date depends on the nature of the conditions precedent and the expected timing for their satisfaction. Where regulatory approvals are required, the longstop date is typically aligned with the applicable review periods. In certain sectors, particularly infrastructure and renewable energy, conditions precedent may relate to specific project development milestones, in which case longstop dates may extend significantly.

The typical allocation of risk differs significantly where the seller is private equity-backed. PE funds seek to maximise distribution certainty and avoid retaining contingent liabilities after completion. Accordingly, PE-backed sellers will usually structure the transaction on a clean exit basis, with limited residual seller recourse other than in respect of narrowly defined fundamental matters.

A principal mechanism used to facilitate a clean exit in Spanish private equity deals is W&I insurance. Through a W&I structure, the purchaser’s primary recourse for breaches of warranties is against the insurer rather than the seller, allowing the latter to significantly reduce its liability exposure. Although the parties can agree that breaches not covered by W&I insurance may not be excluded from the seller’s liability, this is generally not accepted by PE sellers. This contrasts with corporate transactions, where the buyer may have greater leverage to obtain direct contractual recourse against the seller.

Nevertheless, PE-backed sellers as well as corporate sellers will usually retain liability for specific identified risks (specific indemnities) which the parties usually regulate in a separate side letter, particularly when referring to tax and/or labour and social security matters. However, even in these cases, PE-backed sellers will strongly push to establish both a maximum economic liability for all specific indemnities as well as individual economic maximum limits for each specific indemnity.

In Spanish private M&A transactions, warranties are customarily divided into two broad categories – fundamental warranties and business warranties:

• Fundamental warranties cover core matters relating to the transaction, including, among others, the seller’s title to the shares, the target’s valid incorporation, absence of transfer restrictions or encumbrances over the shares, and, where relevant, insolvency-related confirmations.
• Business warranties relate to the operational and financial position of the target group, including accounts, material contracts, tax, employment, regulatory compliance, litigation, conduct of business and absence of undisclosed liabilities.

In corporate transactions, sellers are generally expected to provide a reasonably comprehensive business warranty package, subject to customary limitations such as caps, baskets, de minimis thresholds, time limits and knowledge qualifiers. In PE-backed exits, sellers are typically reluctant to assume post-closing liability for business risks. As a result, business warranties are often given with very limited seller recourse, provided by management under a separate management warranty deed with nominal liability, or supported by W&I insurance.

Under an SPA, a seller’s liability is typically subject to both financial and time limitations. The extent of these restrictions will depend on the nature of the transaction (investment or exit) and whether W&I insurance is in place.

In acquisitions involving a private equity purchaser, fundamental warranties are generally capped at the purchase price or remain uncapped. Business warranties are usually subject to agreed survival periods and liability caps. Warranty periods commonly range from 12 to 24 months after completion, with 18 months being the most frequent, while tax, employment and environmental matters are often covered until the expiration of the relevant statutory limitation periods.

Liability limitations also customarily include:

• a cap, establishing the seller’s maximum aggregate exposure;
• a de minimis threshold, below which individual claims cannot be brought; and
• a basket or deductible, whereby liability is triggered only once qualifying losses exceed an agreed amount, either for the excess only or for the full amount.

In auction and other competitive sale processes, sellers frequently exclude liability for matters identified during due diligence. It is also common for the contents of the virtual data room to qualify the warranties given.

In Spanish PE-backed transactions, escrows or retentions are generally uncommon where the seller is a private equity fund, as they are inconsistent with the seller’s clean exit objective. Where agreed, they typically relate to specific identified risks such as known tax exposures, litigation, regulatory issues or leakage claims under a locked-box structure.

Escrows are typically structured as deposits held with financial institutions or as deposits placed with the public notary before whom the transaction is executed.

Where the purchaser is private equity-backed, deferred consideration and earn-out mechanisms are more commonly seen, particularly where the existing management team remains with the target, to align management’s interests with the future performance of the business.

Litigation arising out of private equity transactions in Spain is relatively uncommon. SPAs customarily include detailed dispute resolution provisions. In most cases, the parties submit to the jurisdiction of the competent Spanish courts, although arbitration is sometimes preferred in larger or more complex transactions, given its advantages in terms of confidentiality and procedural flexibility, balanced against typically higher costs.

The provisions most likely to give rise to disputes involve technical or judgement-based determinations, such as purchase price adjustment mechanisms, earn-out determinations or, in greenfield renewable energy transactions, the achievement of development or ready-to-build milestones triggering associated payments. For these matters, Spanish SPAs commonly provide for referral to an independent expert, with the applicable procedure and scope set out in advance.

Public-to-private (P2P) transactions are uncommon in Spain due to the limited number of listed companies compared to other markets. In 2026, this trend has been reinforced by high public-market valuations and a more difficult acquisition financing environment. 

Spanish takeover bid legislation provides that the governing bodies and management of the target company are subject to a general duty of neutrality and must obtain prior shareholder approval before taking any action that could frustrate the success of the offer, except for the search for competing offers. This restriction applies in particular to actions such as issuing securities that could prevent the bidder from acquiring control. Spanish law also allows target companies, in certain circumstances, not to apply these neutrality restrictions where the offer is made by a non-Spanish bidder not subject to equivalent rules.

In addition, the board of the target company is required to publish a detailed report on the offer within the terms and deadlines established by the applicable takeover regulations.

Any person or entity, including PE, that acquires or transfers shares carrying voting rights in a listed company must notify that company and the National Securities Market Commission (Comisión Nacional del Mercado de Valores, or CNMV) of the proportion of voting rights held by it where, as a result of such transactions, that proportion reaches, exceeds or falls below the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 60%, 70%, 75%, 80% or 90%. When the shareholder is a tax-haven resident, these percentages are lowered to multiples of 1% (1%, 2%, etc).

The notification obligation extends to persons who, irrespective of legal title, acquire, transfer or are able to exercise voting rights indirectly, including through voting arrangements, temporary transfers, pledges, usufruct arrangements or interposed persons. For PE acquisitions, this is particularly important where the structure involves funds, holding companies, co-investors or concerted action structures.

Following the announcement of a tender offer, any acquisition of voting rights that reaches or exceeds 1% must be reported to the CNMV. Any shareholder holding at least 3% of the share capital must notify the CNMV of any changes in its participation.

Any entity that obtains “control” of a listed company shall be required to launch a public takeover bid for all its shares, whether such control is obtained: (i) through the acquisition of shares or other securities which directly or indirectly confer the right to subscribe for or acquire voting shares in that listed company; (ii) through shareholders’ agreements; or (iii) as a result of any other analogous circumstances established by regulation.

Control is understood to be obtained when: (i) it directly or indirectly holds 30% or more of the voting rights, or (ii) holds a lower stake but is able to appoint more than half of the members of the company’s board of directors

The mandatory bid must be launched within three months of crossing the 30% voting rights threshold. However, no bid is required if, within that same three-month period, the shareholder reduces its holding below the relevant threshold, does not exercise the excess voting rights in the meantime, or obtains a waiver from the CNMV.

Failure to comply with takeover bid obligations may result in significant consequences, including the suspension of voting rights, sanctions up to EUR600,000 or 5% of the offender’s own funds, suspension or restriction of the offender’s market activities for up to five years, and publication of the infringement in the Spanish Official Gazette.

Cash consideration is the prevailing form of consideration in most takeover bids, although bidders may also offer consideration in shares.

In mandatory takeover bids, the offer must be submitted at an equitable price, equal to the highest price paid by the bidder for the target’s shares within the 12 months prior to submission. However, the CNMV may adjust that price in certain circumstances, including where the highest price was privately agreed, market prices have been manipulated or affected by exceptional events, or the adjustment is intended to facilitate the financial recovery of the target.

In voluntary takeover bids, the bidder may generally freely set the price. However, an independent expert report may be required in exceptional cases where the market price may have been materially distorted or expropriation or similar measures have occurred. In such cases, the price cannot be lower than the higher of the equitable price and the value resulting from the expert’s valuation analysis.

Mandatory takeover bids may only be made conditional upon obtaining the required clearance from competition authorities or other relevant supervisory regulators. By contrast, voluntary takeover bids may include additional conditions, including, among others: the approval of specific resolutions by the general shareholders’ meeting of the listed company (eg, modification of by-laws), the offer reaching a minimum acceptance threshold, or any other conditions permitted under applicable law, subject to the CNMV’s review and discretion. However, conditioning the bid on obtaining financing is not admissible under Spanish law.

It should also be noted that when the consideration offered is payable in cash, whether in whole or in part, the bidder must fully secure payment of the cash consideration by providing either a bank guarantee issued by a credit institution or evidence of a cash deposit made with a credit institution.

In scenarios involving competing takeover bids, the listed company and the initial bidder may agree on a break-up fee to compensate the initial bidder for the costs and expenses incurred in preparing its bid, subject to the following limitations: (i) it cannot exceed 1% of the total amount of the bid, (ii) it must be approved by the board of the listed company; (iii) its arrangement must be supported by a favourable financial advisors’ report; and (iv) its details must be disclosed in the bid prospectus.

If the PE bidder does not acquire the entire share capital, any enhanced governance position will generally need to be achieved through its shareholding position and/or contractual arrangements with other shareholders, such as voting arrangements, irrevocable undertakings or shareholders’ agreements.

However, any bidder who, as a result of a takeover bid, has acquired at least a 90% stake and whose offer has been accepted by shareholders holding at least 90%, may require the remaining shareholders to sell their shares at an equitable price. Conversely, the remaining shareholders may require the bidder to purchase their securities on the same basis.

In order to enhance deal certainty, bidders commonly seek to enter into irrevocable undertakings with key shareholders before the offer is formally launched. These arrangements typically include a commitment by the relevant shareholders to tender their shares into the offer and, where applicable, to exercise their voting rights in a manner that supports and facilitates completion of the transaction.

These undertakings are usually negotiated before the offer is announced. However, the bidder must assess whether the arrangements amount to a shareholders’ agreement or other arrangement capable of conferring control, as a mandatory offer may be triggered where control is obtained.

Management equity incentivisation is a customary feature of PE transactions, with management teams often retaining or acquiring an equity stake, typically in the range of 5% to 10%. These arrangements are designed to encourage key managers to remain with the business and align management’s interests with those of the PE sponsor for value creation, typically through an extraordinary incentive separate from ordinary remuneration.

The management team’s incentivisation is normally structured through MIPs, which typically include the following incentives:

• ratchets linked to the PE fund’s ROI or IRR, and normally conditioned to the management team’s continuation;
• phantom shares, stock options or similar plans; and
• debt instruments, the interest on which is linked to the ROI or the IRR of the PE fund.

The specific structure of the MIP is typically driven by tax considerations, as well as by the need to ensure that the incentive is properly segregated from ordinary remuneration and linked to value creation on exit.

Management participation and sweet equity arrangements are not subject to a single standardised structure and display significant variability. Their design is typically driven by transaction-specific factors, including the nature and size of the investment, the identity of the financial sponsor, the profile of the management team, and applicable tax, regulatory and corporate law considerations.

Without prejudice to the above, PE investors usually hold preferred shares to secure control over the company’s decision-making – either holding the majority of voting rights and/or veto rights over key or strategic matters. They may also benefit from contractual rights such as a call option right over the remaining shares, drag-along rights, a liquidation preference and similar protective mechanisms.

Where members of the management team were not shareholders prior to the transaction, it is also common for the PE sponsor to facilitate or finance their acquisition of equity, ensuring that management has meaningful economic exposure to the investment.

In a typical structure, managers invest indirectly alongside the sponsor, often through one or more fully participating vehicles. The management team will frequently invest through a common management vehicle, or ManCo, which holds the relevant sweet equity – equity or equity-like instruments made available to managers on favourable economic terms.

Vesting mechanisms, which are very common in MIPs in Spain, are used to mitigate the risk associated with the non-continuation or under-performance of key managers. Vesting periods are typically between four and five years, which is broadly aligned with the usual investment horizon and expected exit timing of PE sponsors.

MIPs often provide for accelerated vesting where a liquidity event occurs before the incentive has fully vested, provided the beneficiary has complied with the MIP terms.

MIPs also include “good-leaver” and “bad-leaver” provisions, to regulate consequences of different exit scenarios: 

• Good-leaver events typically include the termination of the manager’s relation with the target due to death, severe or permanent disability, dismissal by the company without cause, or resignation by the manager for good cause. In these circumstances, the beneficiary is usually entitled to receive the full amount of the incentive.
• Bad-leaver events are usually drafted to include within its definition any event that is not a good-leaver event. In these circumstances, the PE is entitled to terminate the incentive agreement early, without paying the incentive to the relevant beneficiary.

Restrictive covenants and related obligations are typically set out in the documentation regulating the relationship between the PE and the management shareholders.

PE funds usually require the management shareholders to:

• assume non-compete, non-solicitation and exclusivity obligations;
• remain with the company during an established period after the PE fund’s exit if a new investor offers similar conditions;
• assume drag-along obligations or call options and commitments to collaborate in the exit; and
• in certain transactions, grant R&W at the time of the PE fund’s exit.

It is important to ensure that non-compete, non-solicitation and exclusivity undertakings are properly analysed from a Spanish employment law perspective, as their enforceability is subject to statutory requirements, including limitations on duration and the payment of adequate compensation where applicable.

Non-disparagement clauses (regulating what a manager can or cannot say about the PE fund after its exit) are not usual in Spain but may be agreed upon.

In Spanish private equity transactions, minority protection for management shareholders is typically limited and primarily contractual, regulated through the shareholders’ agreement, the MIP and individual subscription or adherence letters. These documents usually provide basic minority protections, such as information rights, protection against arbitrary amendments to the MIP, tag-along rights in certain exit scenarios and equivalent economic treatment within their class. However, management protections are calibrated so as not to interfere with the sponsor’s ability to control the investment and execute its exit strategy.

It is standard market practice to ensure that manager shareholders can preserve their percentage of sweet equity in the company during the PE fund’s period of investment. This may include providing financing to managers for the subscription of additional shares. Anti-dilution provisions typically include a commitment from the PE fund to prioritise non-dilutive financing sources where feasible. However, the PE fund is typically entitled to meet urgent treasury needs.

Veto rights are generally reserved for PE investors, either through preferred shares conferring direct veto rights over certain decisions or by keeping control over the majority of the voting rights of the company (in some structures, sweet equity does not have direct voting rights). However, certain key shareholder managers (depending on their role and involvement) may be granted veto rights over specific matters.

As a general principle, management is entrusted with the ordinary course of business and day-to-day operations, while the PE sponsor retains control over strategic, financial and structural matters at both shareholder and board level, as set out in the shareholders’ agreement (SHA).

This control is typically regulated through the SHA by means of mechanisms:

• the sponsor’s control package, which commonly includes a list of reserved matters requiring its prior approval*;
• comprehensive reporting obligations to the PE fund;
• drag-along rights, allowing the PE fund to force the rest of the shareholders to transfer their shares under certain conditions;
• call options in favour of the PE fund;
• right of first offer (ROFO) or pre-emptive acquisition rights immediately after the lock-up period;
• lock-up provisions restricting share transfers during a specific period of time; and
• non-competition, exclusivity and continuation covenants applicable to management.

The SHA will usually include comprehensive reporting obligations in favour of the PE sponsor regarding any material developments affecting the business, assets, financial position or overall operations of the target.

* At shareholder level, these may include amendments to the by-laws, mergers, demergers, transformations, liquidation or winding-up, dividend distributions, share capital increases or reductions, approval of annual accounts, appointment of the auditor where required, disposals of essential assets, related-party transactions, the granting of convertible loans or the issuance of convertible instruments. At board level, reserved matters typically cover the granting or revocation of general powers of attorney, acquisitions or disposals of assets or businesses above agreed thresholds or outside the ordinary course, material litigation decisions, incurrence of financing above certain limits, formulation of annual accounts, or amendment of the business plan.

As a general principle, shareholders’ liability is limited to the amount of capital they have contributed, or undertaken to contribute, to the company. Exceptionally, Spanish courts may disregard the company’s separate legal personality under the “piercing of the corporate veil” doctrine where the corporate form has been used abusively or fraudulently. The doctrine was first recognised by the Spanish Supreme Court in May 1984 and its application remains exceptional and is interpreted restrictively.

The typical holding period for a PE fund between investment and divestment generally ranges from four to six years, although this timeframe may vary depending on factors such as the expected return or market momentum.

The most common exit routes for PE investors have been auctions and bilateral sales. Dual- or triple-track processes are only attractive to large-cap companies under specific circumstances (depending on market appetite, potential acquirers, etc) as they require significant cost and time.

The growing use of continuation fund transactions reflects a broader shift in private equity exit strategies. These structures provide additional flexibility to retain ownership of high-performing assets while offering existing investors the option to crystallise value or maintain exposure through a rollover investment. Continuation funds have become an increasingly important liquidity and portfolio management tool, a trend that has also gained momentum in Spain.

Private equity transactions typically grant PE investors drag-along rights through the shareholders’ agreement, providing an effective mechanism to facilitate a full or partial exit. The conditions and voting thresholds required to trigger these rights may differ between transactions. As a general rule, drag-along rights can be enforced against all other shareholders. Where another financial sponsor participates, particular attention is given to negotiating lock-up arrangements and exit provisions to ensure alignment between the investors’ respective divestment objectives.

Minority shareholders and members of management who hold equity interests are commonly entitled to tag-along rights. In the case of management shareholders, such rights are typically activated when a disposal by the private equity investor results in a change of control of the company. Likewise, in transactions involving a minority PE investor or multiple private equity sponsors investing alongside one another, reciprocal tag-along and drag-along rights are generally agreed among the PE shareholders.

To avoid uncertainty and potential disputes, shareholders’ agreements should clearly specify the hierarchy and interaction of transfer mechanisms where different rights may overlap, including pre-emption rights, tag-along rights and drag-along rights, together with detailed procedures governing notifications and applicable deadlines.

While an initial public offering continues to be viewed as an attractive exit route for private equity investors, particularly in sizeable transactions, IPO activity has become considerably less frequent since the financial crisis of 2007–08.

The listing of a PE-backed company typically involves a number of features that distinguish it from a conventional IPO.

• Pricing and Valuation Considerations: Private equity sponsors generally collaborate closely with financial advisers and underwriters to determine an appropriate valuation and offering price, balancing strong investor demand with maximising value on exit.
• The Sponsor’s Involvement in the Business: Throughout the investment period, PE funds are often actively engaged in shaping strategy and overseeing performance. Following the listing, their influence is usually reduced as the company becomes subject to public company governance and disclosure requirements.
• Scope of the Divestment: An IPO may be used for a full exit or a staged realisation. In many instances, the sponsor retains a portion of its shareholding after admission to trading, enabling it to participate in future value appreciation and dispose of its remaining stake when market conditions are favourable.