‘Barcelona Special Report 2014: Entrepreneurs come together’, in this report, Gabriel Nadal, Managing partner at ECIJA Barcelona office, gives his insight on the Catalonian legal market.
While Barcelona’s M&A market is picking up as smaller companies join forces in order to enter international markets, it has also fuelled the belief that many of the city´s businesses lack the depth of resources needed to be competitive in the long term. For Barcelona’s lawyers, while M&A deals present more opportunities, clients are negotiating hard on fees and showing an increasing preference for law firm tenders.
On the face of it, things are looking up for the Barcelona economy. Lawyers talk of confidence having been restored and a greater appetite on the part of clients to invest in the city – in fact, some say that investors are diverting their attention away from Madrid and towards Barcelona. There is a feeling in some quarters that M&A activity is picking up, particularly in the real estate, food and health sectors. However, it is worth noting that lawyers say the potential acquirers are generally foreign investors rather than Spanish clients. Real estate is proving to be particularly attractive especially to funds from the US, China, India and Mexico. Lawyers also speak of Barcelona’s reputation as a centre of innovation, and say that there is a thriving community of entrepreneurs driving the city forward.
But it would be a little simplistic to say that Barcelona is a city that has completely recovered from the economic problems which have plagued it – and indeed the whole of Spain – in recent years. There is a commonly held view among lawyers that the pharmaceutical industry, for example, is struggling. In addition, while some talk of recovery in the tourism sector, others argue that it is an industry that is too fragile to have the hopes of the city´s economic resurgence resting on it. Meanwhile, some lawyers claim that while Barcelona´s reputation as a place of innovation and entrepreneurial spirit is often held up as a source of great pride, the downside is that it is also the city´s downfall. The argument put forward by the doubters is that Barcelona´s companies are too small to really flourish and are always vulnerable to fluctuations in the economy.
So what does this all mean for the city’s legal sector? On one hand there are considerable opportunities for Barcelona’s law firms. New investors are looking to make acquisitions in the sector and are now turning their attention to assets that are performing well, rather than just those in distress, lawyers say. Meanwhile, there are Catalonian companies who need advice on strengthening their international presence. Tax lawyers also expect an increase in instructions in relation to contentious matters as the authorities – in their search for extra financial resources – increase the number of tax inspections that are carried out.
Law firm tenders are an increasing trend, according to lawyers. While clients’ demands for long term strategic advice means law firms are increasingly being forced to reorganise themselves along industry sector lines. There is also a greater resistance among clients to being charged hourly rates.
Miquel Montañá, Partner at Clifford Chance, says confidence is returning to the Barcelona market. “The confidence factor has been restored, but it´s difficult to highlight specific sectors,” he says. “Spain is pretty competitive.” That said, Montañá adds that some sectors are continuing to struggle. “The pharmaceutical and automotive sectors are having a hard time,” he says. Joan Roca Sagarra, Managing Partner of Roca Junyent Abogados, says the economy has been flat for the last two years, but now Barcelona is attracting investment because it has become a “good gate through which investors can enter the Spanish market”. He adds: “It is an innovative city, there are a lot of technical or biomed start-ups.” Antonio Herrera, Partner at Uría Menéndez, says that Barcelona’s entrepreneurial culture means it is at the forefront of industrial development and that consequently he expects to see more transactions taking place.
Daniel Marín, Managing Partner of the Barcelona office of Gómez-Acebo & Pombo, says what is new is that some clients are making acquisitions in the city. “Clients had been investing in Madrid, but now they´re investing in Barcelona,” he says. “We’re also seeing clients divesting non-core assets as well as international deals involving foreign investors – there is also complex litigation work”.
ECIJA’s Barcelona Managing Partner, Gabriel Nadal, says, as had been anticipated, the relative position of Catalonia in the region has improved during the recession. “The Catalan economy has emerged as more attractive, more international and more competitive when compared to other competing areas in the region,” he says. Nadal acknowledges that the economy is still in deep, but adds that “what we see as hot” is real estate (both commercial and residential) turnarounds and acquisition of distressed assets; compliance packages; as well as small start-ups in the telecom and technology sectors.