The main conclusions of the third debate table “The new M&A in restructuring”of the III Restructuring Forum, organized by elEconomista.esshow that the new bankruptcy law has generated mixed expectations in the corporate restructuring sector in Spain. Even though new opportunities have been created, particularly in terms of access to financing for companies in difficulty, the law still faces significant challenges in its implementation.
Jorge Fernández Miret, senior partner and director of the investment area at Sherpa Capital, He said energy is one of the “least interesting sectors to watch” and at the start of the pandemic there was considerable uncertainty about the future of the energy market. Furthermore, he said government measures created a wide range of opportunities. However, he explained that currently the dynamics have changed and “there is no longer a key segment”, due to the way companies have faced the post-Covid period and their own internal situation.
Ignacio Arambarri, country manager of Sandton Capital in Spain, He described the current market as “fishing season” due to the “revolution in the ocean”, referring to the volatility of sectors such as automation, fashion retail and toys. He says rather than focusing on trending sectors, attention has shifted to types of companies that four years ago were in a stable position, but now have double the debt. or triple, in addition to worse gross margins and EBITDA. “More than sectors, the change is due to modes and type of business,” commented Arambarri.
For his part, Sony Ganwani, Country Director of Indo Capital, He explained that his company focuses on the energy sector, particularly in areas such as photovoltaics, gas and wind energy. “In the COVID era, the market focused on masks; then the energy came, and now there are problems with the electricity distributors,” he said. He noted that many companies have turned to rail to build, but “when they get there, they don’t have financing.”
Alfredo Castrillón, managing partner of Tertius Capital, He said that in his personal case it was very clear “which sectors he does not enter.” He recognized, however, that they cannot always position themselves definitively on the market and that when a sector is fashionable, “the shareholder believes that he has made the right decision with his investment, but in reality the liquid gold slips through his hands. ” According to Castrillón, even if a sector is popular, the shareholder ends up realizing that “he doesn’t have this gold.”
Miret He explained that his company is usually “the last call” that companies turn to when they already have serious problems in the equity area. “When they call us, they already have a serious problem. Sometimes we have to enter the operating room without tools,” he said, referring to the fact that in many cases companies wait too long long time to ask for help. Miret regrets that people often think they can “work magic”, when in reality they need time and a restructuring plan which, in some cases, is no longer viable. “We try to stay ahead of the curve and be proactive, but ultimately the only option left is to purchase,” he said.
Likewise, Arambarri He stressed the importance of “psychology to educate the owners” of companies in crisis. According to Arambarri, many businessmen question the direct benefit of the interventions of funds like his and believe that, in some cases, the sector is “bad”. He added that there is a lack of understanding among shareholders about the long-term benefits: “If you don’t win, you’re already losing it. There’s an important psychological process.”
For his part, Ganwani considers its role as that of a “necessary evil” within the system. “The problem is the system,” he said, criticizing the slowness of the courts and the vicious circle created by the lack of speed of responses. Ganwani explained that in some cases, funds have to charge high fees simply because the time spent on the processes leaves no other option: “Just by being there that long… there is no other choice but to be dear. »
Castrillon According to him, the problem lies not so much in the gradual process of business decline but in the disruptive events that generally undermine their stability. Castrillón described how, when a company has cash flow problems and is forced to hire lawyers, advisors and funds, a senior partner emerges. “We entered at that time because there was no other way out, and often the family business faces problems that go beyond the business itself,” he said . He also regretted the lack of help from the system for the entrepreneurial fabric, since the costs linked to survival kill the business: “It is a big burden that businesses bear when they are already in a difficult situation “.
Also Miret He highlighted the difficulty of operating in the “large market”, where, although initially welcomed to bring in new capital, financial creditors quickly begin their exit plan. “They welcome you because you bring new money, but then they launch their exit plan,” he added.
Castrillonon the other hand, described his attempts to restructure four different companies, emphasizing the need for a “change of interlocutor” for the processes to move forward, although this does not always guarantee success. Regarding the new law, Ganwani expressed skepticism, emphasizing that while it should make evaluation easier, the three-year time frame represents a challenge: “After the third year, we have to sit down again and renegotiate as if we were new investors. , he concluded, adding that he is not optimistic about the effectiveness of this regulation.
Bankruptcy law, without impact
Miret He explained that at Sherpa Capital, it was considered that the law would be a comprehensive solution, but that although it has benefited some companies in terms of financing, it has not had a big impact for equity funds. He noted that this has allowed some businesses to access financing that was not previously available.
For his part, Ganwani He said there had been no significant changes and while some businessmen appeared to be moving forward to avoid serious problems, the outlook remained uncertain. Arambarri of Sandton Capital explained that they thought the process would be simpler, but in reality businessmen are more focused on executing a plan than selling assets, which has generated complications.
Castrillonof Tertius Capital, highlighted the agility that the law offers to companies, although he mentioned that approval in court usually benefits the first to present it, due to the asymmetry of information that exists between different actors. According to Arambarri, it is important for shareholders to anticipate and adapt to market and creditor circumstances.
Miret He added that the restructurer should have more judgment and authority, because he often acts as a mere intermediary without providing clear solutions. Arambarri mentioned the conflict of interest that can arise in the figure of the expert, since he does not always act impartially. Miret He also criticized the fact that the bankruptcy administrator is appointed by the manager rather than the court, and stressed the importance of an independent representative who guarantees the generation of liquidity to pay creditors.
CastrillonIn this sense, he emphasized that external figures tend to distort the process, since no one understands the situation of the company better than someone who is ready to inject new capital. He indicated that he and his team usually present a restructuring plan and, if it is not accepted, they prefer to withdraw from the process. Ganwani shared his experience, emphasizing that working directly with the founder, without the intervention of an expert, facilitates the agreement.
Castrillon He argued that no one knows the company’s situation better than its founder or CEO, and that the presence of an expert does not always add value. Fernandez Miret He observed that many businessmen do not understand that it is better to own a smaller percentage of the business but a creditworthy and professional business.
Ganwani He said modern businesses are different from traditional businesses, as the former tend to separate their personal assets from their business assets. Fernandez Miret He mentioned that, even if the processes are questioned, the important thing is to maintain funding to guarantee operational continuity. Ganwani added that impeachment is often used as a strategy to buy time.
Castrillon He considered that all laws could be improved and that current regulations have helped in some aspects, but have also created obstacles, notably by not considering restructured companies in better conditions of access to credit. He stressed that Spain cannot depend only on large companies, but must support SMEs.
Judicial agility
Miret suggested that faster court proceedings were needed to resolve business crises in months, not years. Arambarri proposed establishing barriers for the purchase of low-cost productive units, such as a minimum deposit, to avoid saturation of interested parties without sufficient resources.
Ganwani He stressed the importance of the active role of the restructuring advisor in the process, because without real involvement, his intervention is ineffective. Fernandez Miret He criticized the fact that the bankruptcy administrator is not always an expert in mergers and acquisitions, which limits the effectiveness of his decisions. Castrillón added that the delays were longer due to the strikes, but affirmed that the process could be concluded in less time.
In economic terms, Miret noted an increase in the use of private equity and debt opportunities, while Ganwani warned of inflation and its negative impact on growth. From an Asian perspective, he is skeptical about Europe’s growth potential. Castrillón, however, was optimistic about opportunities in various sectors in Spain, emphasizing that, despite the uncertainty, the country has assets that can be leveraged.
