The M&A and Private Equity market kicks off the year with a surge in activity

The private equity market in Spain has once again demonstrated its strength and resilience, successfully adapting to a global environment of uncertainty and navigating the geopolitical challenges shaping today’s economic landscape. Data from the Iberian Market Annual Report 2025 by TTR Data highlights this trend: in 2025, Spain recorded 3,336 transactions with a total value of €103.085 billion.

The year-end figures show a more concentrated M&A market: although the total number of transactions was lower than the previous year, the aggregate deal value increased, and a strong final-quarter rebound was instrumental in reversing the downward trend and sustaining the annual balance.

Resilience in times of uncertainty

As M&A activity moves past the indecision seen earlier, the pace of deal closings is gradually returning to more typical levels. This climate reflects the ability of investors to overcome global economic and geopolitical uncertainty.

As Noelle Cajigas, Partner and Head of Deal Advisory at KPMG Spain, explains: "The noise and uncertainty across multiple fronts affected last year and slowed M&A activity, except in certain market segments. However, the dynamism of professional investors, the volume of available capital, and the vibrancy of many sectors have signaled a reactivation. In fact, we see not only new projects every day, but also the resumption of others that had been on hold. We trust that the activity levels observed in the past few months will continue throughout 2026, and that around this time next year, we will be able to celebrate a strong performance."

This context demonstrates an adaptability to challenges that, while significant, have not paralyzed economic activity. Growth projections for Spain have been revised upwards, suggesting that despite external pressures, the local economy is showing signs of robustness.

Opportunities in Technology and Defense

Within this investment landscape, the Technology and Defense sectors have emerged as notable safe havens. This trend underscores their relevance and potential as growth drivers in an ever-changing geopolitical environment. Digitalization and modernization of defense processes represent key areas where private equity can play a decisive role, promoting the development and innovation of advanced solutions aligned with emerging market needs. Investor attention to these areas reflects growing interest in capitalizing on opportunities that address both current and future challenges.

New Strategies in Private Equity: Flexibility, Proactivity, and Diversification

The current financial market landscape requires private equity firms to adopt strategies emphasizing flexibility, proactivity, and diversification.

As José Gonzalez-Aller, Partner and Head of Private Equity at KPMG Spain, explains: "Volatility has also influenced investment strategies. The ability to adapt quickly to market conditions has become crucial, fostering a preference for proprietary deal origination and a strategic focus on investment diversification. Additionally, bringing new partners into the firms reflects a trend toward collaboration and capacity building, enabling them to compete more effectively."

Flexibility is not only the ability to take on more risk but also a tool to manage risk effectively. Firms that implement a flexible approach can explore a wider range of investment opportunities and react quickly to changes in the financial environment.

Proprietary deal origination is another key trend. By anticipating transactions and developing deep sector knowledge, firms strengthen long-term relationships with company owners, improving the likelihood of success and reducing uncertainty associated with traditional auction processes.

Diversification through continuation funds and minority stakes also emerges as a critical strategy. It enables firms to maximize existing asset value while sustaining growth. Bringing in new partners can provide fresh capital, knowledge, and networks, essential for growth and innovation in private equity.

These dynamics are not only reshaping the sector but also positioning it as a key player in the pursuit of sustainable, profitable opportunities in an increasingly complex environment.

Banks and Direct Lenders: Driving Private Equity Financing

Debt financing is once again gaining prominence in private equity. With growing liquidity and a robust appetite for funding deals, debt has returned to the forefront.

According to Ovidio Turrado, Partner and Head of Funding Advisory at KPMG Spain: "Debt is a fundamental element in private equity strategies, as it optimizes capital allocation and enhances investment returns."

Collaboration between banks and direct lenders is transforming deal structuring, allowing funds and financial institutions to co-invest rather than fully fund transactions themselves. This approach provides flexibility and leverages additional capital where needed.

Investors are prioritizing companies with strong cash flows and favorable risk profiles, emphasizing selectivity in debt allocation.

Mid-Market Dynamics: Growth Potential and New Opportunities

The Spanish mid-market is attracting increasing attention due to its higher growth potential, flexibility, and presence in innovative sectors. Its share of total transactions has risen from 25% to 42% in recent years.

Mid-market companies, particularly family-owned SMEs, are more receptive to financial investor participation, offering opportunities to build strong, collaborative relationships with owners.

Ignacio Martínez, Partner in Corporate Finance M&A at KPMG Spain, highlights: "The mid-market allows for more flexible deal structuring. This flexibility enables tailor-made investment solutions for each company. Combining organic growth with acquisitions backed by a financial partner can create a virtuous cycle where companies not only develop but also become more attractive to future buyers."

The entry of new players such as family offices and large funds is enriching the investment landscape, increasing capital availability and fostering healthy competition.

Value Creation through Financing

In the current uncertain economic environment, private equity firms are increasingly adopting a collaborative approach with portfolio companies, focusing on long-term value creation.

Jorge Sainz, Partner of Strategy & Value Creation and Head of Industry, Defense, and Automotive at KPMG Spain, notes: "Inorganic growth through complementary add-on acquisitions not only expands the potential of our portfolio companies but also reflects our commitment to working closely with them to maximize value and ensure a sustainable future."

This approach provides portfolio companies access to new capabilities and markets, while fostering stronger engagement and support from management teams, resulting in more efficient deal execution. Furthermore, NAV-based financing has become highly competitive, offering attractive terms that facilitate strategic transactions.