Some 3m mostly poor Latin Americans have migrated to Spain since the 1990s in search of a better life in Europe. More recently, investment capital has also begun to head east and north across the Atlantic Ocean for much the same reason.
Sports assets are one of the entry points. It is noteworthy that two of the 14 Spanish deals with Latin American investors logged last year by Dealogic involved the acquisition of football clubs by Mexican investors: Real Oviedo by Grupo Pachuca and Real Sporting de Gijon by Orlegi Deportes.
Spanish M&A involving Latin American investors still sits at the bottom of the hockey stick, despite a promising result in 2021, when Dealogic data logged 19 deals amounting to EUR 980.6m. Much of the incoming money has been going into property so far.
However, one encouraging sign for the future is that Spanish startups and tech companies have started bringing Latin American investors into their fundraising rounds. Examples include Pulpo, a software platform for intelligent fleet management, which closed an USD 8m financing round led by the Mexican venture capital fund Nazca Ventures; or Cobee, an employee benefits platform company, which raised EUR 14m in a Series A in July 2021 with the Mexican fund Dila Capital providing funds.
Despite a modest start to the trend, the prospects for growth look bright. At least four Spanish football clubs are seeking new owners: Atletico de Madrid, Espanyol, Sabadell and Valencia. Wealthy individuals from Latin America who want to nurture their estates in investor-friendly jurisdictions would be more than welcome to study the opportunities.
Meanwhile, corporates from Latin America have also expressed an interest in growing via acquisitions in Spain. Examples from Brazil include 3C Plus, a developer of automatic dialing solutions; or Digital Branding Group (DBG), a holding company specializing in digital communication and marketing solutions.
Sponsors from Latin America are also starting to get in on the act. Nexxus Capital, a private equity (PE) firm from Mexico, is raising its second Iberian fund, which will replace its Nexxus Private Equity Iberia, launched in 2018 with EUR 130m committed in a first close by Spanish and Mexican investors. The fund provides capital to small and mid-sized companies in Spain while supporting them as they grow in Europe and in Latin America.
Nexxus's strategy of providing Mexican capital to Spanish companies that want to grow in Latin America provides a clever twist on an old trend. Spanish companies have been aggressive buyers in Latin America since the 1990s, leading to many clichés about conquistadores.
La Nueva Miami
If the new trend of Latin Americans investing in Spain takes hold, it will be time for new clichés. Spain's capital, Madrid, is becoming an investment hotspot. The influx of Latin American cash has prompted some to describe the city and the landlocked autonomous community with the same name as Europe's version of Miami.
Madrid might be colder than Miami, particularly in winter, and attempts to brand the edges of the region's reservoirs as beaches have mostly been unsuccessful, but there is something to the analogy.
The government of the Madrid region, run by Isabel Diaz Ayuso of the center-right Popular Party, has developed an economic policy focused on a predictable legal regime and low taxes to attract investment. Direct investment from Latin America in the Madrid region since 2008 has amounted to a total of EUR 12bn, according to the Economy department of the Madrid regional government.
In addition to real-estate investments, several Latin American companies have done deals with Madrid-based companies, such as Argentina-based Globant [NYSE: GLOB] which created a joint venture with LaLiga, Spain's top-flight football competition, called LaLiga Tech. Many Latin American companies headquarters have their European headquarters in the city, including Mexican building materials giant Cemex [NYSE: CX].
Real estate, football clubs and regional headquarters are all well and good, but at some point, Latin American cash coming into Madrid and Spain will need to look for better returns. When that time comes, fundraising rounds for scale-ups will come into sharp focus, along with cash calls to support empire-building by corporates and PEs.
Did you enjoy this article?
Add the following topics to your interests and we'll recommend articles based on these interests.