Why do foreign investors choose to buy an existing business in Spain?

Contents

• Why Does Spain Attract Foreign Investors?
• Investments in an Existing Business in Spain
• Obtaining a Residence Permit Through Business Investments

Many entrepreneurs focus on the Spanish market when searching for potential investment opportunities abroad and prefer to acquire existing businesses. This choice is driven by the prospects and specific factors that make Spain an attractive place for capital investment. In this article, in collaboration with experts from Laduchi Consult, we will examine which countries' investors are particularly interested in the Spanish market and what attracts them to purchasing already functioning enterprises.

Why Does Spain Attract Foreign Investors?

The country holds a prominent position on the global stage due to the significance of its economy:

• 16th largest economy in the world by GDP
• 15th in terms of foreign direct investment volume
• 15th in terms of commercial services export volume
• 46 ports, including four major European ports; 152 logistics parks, and the largest platform in Europe covering over 1.3 million square meters
• Tax neutrality regime for business restructuring operations, allowing mergers, divisions, or any other structural reorganizations to be carried out without tax penalties
• Moderate corporate tax rate (25%), with incentives and tax benefits potentially reducing the effective tax rate to around 20%

In addition, investors establishing a company or choosing to buy a business in Spain not only gain access to a national market known for its size (over 48 million consumers) and high purchasing power. However, they also seize the opportunity to enter the markets of the EMEA region (Europe, Middle East, and North Africa) and Latin America.

According to data from the Ministry of Economy, Trade, and Business, the total foreign direct investment in Spain for 2023 amounted to 28,214.9M euros. Leading the ranking are the United States, followed by Germany and France.

Foreign investments by country in 2023 (excluding ETVE)

The Kingdom has made significant efforts to create advanced infrastructure to facilitate future economic growth, including investments in scientific research and development activities.

The country offers compelling opportunities in strategic high-value-added sectors such as information and communication technologies, renewable energy, biotechnology, ecology, aerospace, and automotive manufacturing.

Foreign investments by sectors in 2023 (excluding ETVE)

Investments in an Existing Business in Spain

First, let's clarify what an "existing business" means. In the context of the Spanish economy, this entails much more than just the formal procedure of re-registering a legal entity and transferring physical assets such as real estate, licenses, or production resources. It involves a complex and comprehensive process that encompasses changes in the company's structure and impacts on production capacities, the fate of personnel, business processes, relationships with key partners, and much more. Each of these elements plays a role in ensuring the successful operation of the local business.

Let's consider the most common types of assets:

• Real Estate: Offices, retail spaces, warehouses, parking lots, garages, and other properties that serve as the company's operational base.
• Production Facilities: Machinery, equipment, and apparatus necessary for manufacturing products.
• Transportation: Personal vehicles, trucks, and specialized equipment that facilitate business operations.
• Permits and Licenses: Special permissions are required for the company's operations (transferred to the new owner upon the sale of the business).
• Intellectual Property: Unique technologies, designs, schematics, plans, software, branding, and other elements of intellectual property.
• Additional Assets: Branches in different cities, subsidiary companies, and other supplementary assets. Sometimes, companies are sold as a "package," including all affiliated structures.

Studying the legal intricacies that await foreign investors on this path is essential before investing in an existing business. It will help you avoid unexpected costs. This article discusses Due Diligence and why it is critically important when purchasing a business.

Benefits of purchasing an existing enterprise include:

1. High potential for rapid return on investment:
   Buying a ready-made business in Spain offers investors stability and opportunities for quicker returns on investment than starting a new company. Structured business processes, refined management strategies, and an established customer base give investors a solid foundation for a swift start, reducing the time to break even.


2. Risk minimization:
   Before finalizing the deal, investors have a unique opportunity to thoroughly examine the company from within – conducting a detailed analysis ranging from its financial status to tax and legal obligations. When considering a business for sale in Spain, potential buyers are granted full access to financial statements, tax documents, and other crucial information, ensuring a deep understanding of the current business situation. Due Diligence analysis is a vital tool for identifying potential risks, obligations, and prospects, significantly reducing potential negative consequences and enabling an informed decision.
   When considering a business for sale in Spain, potential buyers are granted full access to financial statements, tax documents, and other crucial information, ensuring a deep understanding of the current business situation. Due Diligence analysis is a vital tool for identifying potential risks, obligations, and prospects, significantly reducing potential negative consequences and enabling an informed decision.


3. Management flexibility and a cohesive team:
   A well-integrated team and streamlined business processes significantly reduce the time to launch and stabilize a new enterprise while ensuring management flexibility when approached correctly. Entrepreneurs who prefer not to delve into operational details can leverage management flexibility to implement strategic changes, adopt new approaches, and optimize business processes. This approach allows them to focus on critical strategic decisions while a ready team of professionals handles the routine operational activities.
   
   «Before selecting a business project for investment, Laduchi Consult specialists conduct in-depth interviews with the investor. This aims to identify needs and the desired level of involvement in the acquired business, determining the nature of the investment—whether active or passive.» – David Sherozia, CEO of Laduchi Consult


4. Reputation and Customer Base:
   Investing in an existing enterprise allows investors to acquire a company with an established reputation and history. This advantage is precious because it will enable the investor to avoid starting from scratch in building trust with customers and business partners. Successful enterprises have already established client relationships and likely secured stable market positions. By choosing such a business, the investor automatically inherits its reputation, facilitating quicker market entry and attracting new customers and business partners more effectively.


5. Access to Licenses, Technological Innovations, and Intellectual Property:
   Acquiring a business in Spain often includes gaining valuable technological developments and intellectual assets. This enables the investor to leverage existing innovations and integrate them into their strategy, thereby gaining a competitive advantage in the market.

Thanks to established relationships with financial institutions, investment funds, legal and law firms, Laduchi Consult experts can offer investors opportunities that are not readily available to the public at special prices. An example of such an opportunity could be acquiring a car recycling plant with an active environmental license. It's important to note that the new owner automatically becomes the license holder upon purchasing the business.

Purchase of an Existing Business to Obtain an Investor Residency Card in Spain

Obtaining an investor residency card by purchasing an existing business presents an efficient and structured path for those seeking legal residence in the country. This method offers several advantages and, with the right strategy, can significantly increase the likelihood of completing the visa application process.

Requirements for obtaining an investor residency card in Spain through the purchase of a business:

1. Investment Size:
   According to the "Golden Visa" program rules, there is no minimum investment amount for acquiring an existing business. However, the minimum investment amount to qualify for the visa is 500,000 euros.


2. Job Creation and Technological Development:
   An essential condition is a commitment to creating jobs in Spain and contributing to the country's technological development. The company must actively participate in the country's economic life and implement innovative technologies.

Safe Investments in Spanish Business with Laduchi Consult

Acquiring an existing business in Spain is a complex process that requires deep market knowledge and quality legal support. Laduchi Consult experts will provide you with comprehensive legal assistance at every stage of the purchase process – from conducting a thorough Due Diligence analysis to notarizing the transaction and resolving tax matters, if applicable. We offer expert guidance and support so that you can make informed decisions and avoid potential legal risks associated with purchasing a business in Spain.

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