The New Spanish Armada
With a wave of Spanish takeovers of European companies, can Spain's advancing armada of acquisitions be stopped?
A wave of Spanish businesses have their sails set towards European shores, as several foreign companies are snapped up by the Spaniards set on invasion.
Spanish businesses have enjoyed Spain's economic boom in recent years, created by the construction companies taking full advantage of the lucrative property market in which house prices have increased by 270% over the past ten years, triggered by heavy investment by the Spanish government in infrastructure in the 1990's. Last year alone, there were 800,000 new houses constructed in Spain; eye-openingly more than France, Germany and Italy combined. Ferrovial has been one of the several Spanish companies which have undergone massive expansion as a result, with last year's growth at over 50%.
With a secure foothold as Spain's second largest construction company, Ferrovial had their masts directed towards BAA, who boasted controlling seven different airports in the UK, including London's busiest airport Heathrow. Ferrovial's successful acquisition helped their net profit soar 242.6 percent, confirming their place as one of Europe's largest construction firms.
The success stemming from the Spanish economic explosion in the 1990's wasn't limited to construction firms, however; the utility sector has benefitted massively from the rise in energy demands which has come with new developments, and are also seeking to conquer Europe's energy markets.
Spanish utility giant Iberdrola overcame the German competition from E.ON, Europe's largest energy group, with a successful takeover bid for Scottish Power of £11.6bn last year, consequently creating Europe's third largest utility company. This has spread panic among other European power companies struggling to grow to keep up with Europe's new energy giant. Gaz de France and Suez are attempting a merger to create a French power giant, while Iberdrola negotiate cheaper natural gas and wind turbine contracts levered by their new size, which by their estimates will cut their capital expenditures by 40 million euros a year for the next five years. With news of a further acquisition by Iberdrola of Energy East in the US, Iberdrola's position as one of Europe's energy colossus' can only be amplified.
With Telefonica's more recent takeover of O2 being the latest British acquisition by a Spanish firm since Santander's takeover of Abbey National, many may be asking themselves where the limit is for the new Spanish Armada, and where exactly it has come from. Some argue that the tax breaks which were introduced in 2002 which allow Spanish companies that acquire shares in foreign groups to write off some of the costs of the purchase against their domestic tax over 20 years. This tax break is currently being considered by EU officials in Brussels, and if they deem this tax break to be illegal state aid, Spanish companies may be forced to pay billions of euros into the Spanish treasury as unpaid taxes.
With this controversial case underway, Spanish companies also face problems back home; there is worry over a Spanish property price bubble burst, and over-supply in this market has lead to a sudden halt in construction.
So could this mean the retreat of an advancing armada? Have the Spanish already secured their place in foreign markets, left to sail the markets unstopped, or will problems in their homeland mean their retreat? Only time will tell.
Spanish businesses have enjoyed Spain's economic boom in recent years, created by the construction companies taking full advantage of the lucrative property market in which house prices have increased by 270% over the past ten years, triggered by heavy investment by the Spanish government in infrastructure in the 1990's. Last year alone, there were 800,000 new houses constructed in Spain; eye-openingly more than France, Germany and Italy combined. Ferrovial has been one of the several Spanish companies which have undergone massive expansion as a result, with last year's growth at over 50%.
With a secure foothold as Spain's second largest construction company, Ferrovial had their masts directed towards BAA, who boasted controlling seven different airports in the UK, including London's busiest airport Heathrow. Ferrovial's successful acquisition helped their net profit soar 242.6 percent, confirming their place as one of Europe's largest construction firms.
The success stemming from the Spanish economic explosion in the 1990's wasn't limited to construction firms, however; the utility sector has benefitted massively from the rise in energy demands which has come with new developments, and are also seeking to conquer Europe's energy markets.
Spanish utility giant Iberdrola overcame the German competition from E.ON, Europe's largest energy group, with a successful takeover bid for Scottish Power of £11.6bn last year, consequently creating Europe's third largest utility company. This has spread panic among other European power companies struggling to grow to keep up with Europe's new energy giant. Gaz de France and Suez are attempting a merger to create a French power giant, while Iberdrola negotiate cheaper natural gas and wind turbine contracts levered by their new size, which by their estimates will cut their capital expenditures by 40 million euros a year for the next five years. With news of a further acquisition by Iberdrola of Energy East in the US, Iberdrola's position as one of Europe's energy colossus' can only be amplified.
With Telefonica's more recent takeover of O2 being the latest British acquisition by a Spanish firm since Santander's takeover of Abbey National, many may be asking themselves where the limit is for the new Spanish Armada, and where exactly it has come from. Some argue that the tax breaks which were introduced in 2002 which allow Spanish companies that acquire shares in foreign groups to write off some of the costs of the purchase against their domestic tax over 20 years. This tax break is currently being considered by EU officials in Brussels, and if they deem this tax break to be illegal state aid, Spanish companies may be forced to pay billions of euros into the Spanish treasury as unpaid taxes.
With this controversial case underway, Spanish companies also face problems back home; there is worry over a Spanish property price bubble burst, and over-supply in this market has lead to a sudden halt in construction.
So could this mean the retreat of an advancing armada? Have the Spanish already secured their place in foreign markets, left to sail the markets unstopped, or will problems in their homeland mean their retreat? Only time will tell.