Conquistadors lose sense of adventure

Remember Spain's modern-day conquistadors? In the years before the great recession, that was the name bestowed on a select group of Spanish companies that had set out to conquer Latin America all over again. Like their 16th century counterparts, they travelled in pursuit of treasure and glory. But the modern version arrived not with musket-wielding soldiers and friars - instead they brought hordes of investment bankers, accountants and lawyers.

Flush with ambition and money, they bought their way into Brazil, Mexico, Argentina, Peru and a raft of similar markets. Within a few years, Spanish groups such as Banco Santander, BBVA, Telefonica and Repsol emerged as pivotal players across much of the continent.

Back home, their overseas adventures were hailed as a big success. Their deals were well-timed, giving them access to markets that were growing strongly on the back of the global resource boom and a corresponding surge in domestic spending. They also provided a cushion against the post-2007 crisis: with Spain mired in recession, Santander, Telefonica & Co came to rely heavily on their Latin American operations to brighten the Iberian gloom.

Fast forward to today, and Spanish companies are on the hunt for foreign acquisitions once again. This time, however, they are far more likely to wash up on the shores of Europe, North America and Australia. The new mantra is "OECD only". Bankers in Madrid say their clients are looking above all else for targets in the well-developed, well-regulated countries that belong to the Paris-based Organisation for Economic Co-operation and Development.

Indeed, the three most headline-grabbing foreign takeovers of the past 12 months all fit the same pattern: Telefonica spent €8.6bn to buy mobile operator E-Plus in Germany, a deal that was swiftly followed by Repsol's €6.6bn bid for Talisman Energy of Canada. In March this year, Banco Sabadell made an unexpected €2.4bn move for TSB, the British lender, in a rare attempt at cross-border banking consolidation in Europe.

Spanish bankers and top executives say they expect more of the same this year. Ferrovial made a A$1bn bid to buy Transfield Services, the Australian outsourcing and constructions services company, last year. This offer was rebuffed, but Ferrovial's bosses have made clear they are looking to run down at least part of the group's €4bn war chest. Shareholders have been assured that the search for targets will take place mainly inside the OECD.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

In 2012, Argentina nationalised the Spanish group's YPF operation, widely seen as the jewel in Repsol's crown. After years of legal wrangling, the Spanish group eventually secured a compensation package worth $5bn from Buenos Aires. When it came to reinvesting the proceeds, Repsol executives made no secret of their desire to bulk up in a region that was politically stable and well-regulated: Adios Buenos Aires, Hello Canada.

Neighbouring Bolivia, too, has nationalised Spanish-owned companies, as has Venezuela (not always, it must be said, to the financial distress of the seller). But the sharp fall in the value of the Venezuelan Bolivar and other currencies in the region has hurt Spanish groups all the same.

<>Political risk is less of a concern in Brazil, the biggest market by far in South America and - in the medium and long term - still a hugely attractive prospect. But right now the economy is in dire straits, and popular anger with the government is on the rise. When analysts look at the results of Spain's blue-chip corporations now, Brazil is usually the main area of concern. Until very recently, it was the one undisputed bright spot.

Like all trends, the recent shift in Spanish attention from Latin America to more developed markets is far from uniform. Both Santander and Telefonica have recently fortified their presence in Brazil. For them, as for other top Spanish companies, Latin America will always be a crucially important market.

But, after so many years of bare-knuckle adventure, Spain's intrepid conquistadors feel that what they need right now is a bit more stability in their lives.

[email protected]

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation