Lessons from Corporate Spain

Good afternoon all and welcome to the Someplace Else blog.

For the third year in a row, I’m attending a huge trade show in Madrid called SIMA, and I’ve been struck by the positive attitude of the big Spanish developers in the face of a very difficult local market.

On the one hand, they have belatedly realised that the second home / holiday market is completely saturated. They are now refocusing the sale of their new developments to the local first time buyers market, with knowledgeable (and very good looking) salespeople manning some stupendous exhibition stands offering a wide range of sensible incentives and access to finance (unlike the Irish developments mentioned in last weeks note)

And on the other hand, these same Spanish builders are announcing bold and ambitious new developments throughout South America and Eastern Europe, with the biggest announcements being made in Panama, Mexico and Romania.

This all seems to be just the latest example of a quiet revolution in the upper echelons of corporate Spain. Since the return of democracy in 1975 Spanish companies have made some tremendous progress and the country is now home to some truly world-class corporations.

Spain is already home to the biggest bank in Europe (Santander), to five of the top seven European construction groups and to the third biggest telecommunications company in the world (Telefonica). The Inditex Group, which owns Zara among other brands, recently over took GAP as the world’s largest fashion retailer. Metrovacesa, a Spanish property company, bought the HSBC headquarters in Canary Wharf last year for £1.1 billion – Britain’s biggest ever single property deal.

Much of this recent expansion has come from audacious takeovers – Santander bought Abbey National in 2004 for €8 billion, Telefonica bought O2 in 2006 for €26 billion. Equally impressive was Ferrovials highly leveraged $22 billion takeover of BAA, the company that owns Heathrow, Stansted, Gatwick and four other British airports. Nightmare teething problems at Terminal 5 aside, this is an unbelievable acquisition for a family owned company that started out building railroads in Northern Spain 50 years ago.

So it seems that the Spanish conquistador spirit is alive and well in this wonderful country, and your humble correspondent is very happy indeed to discover that these huge corporations are bravely venturing into many of the same markets Someplace Else promotes to our UK and Irish investors.