As the euphoria that followed Spain's winning of the UEFA European Championship starts to subside, football fans are however beginning to wake up to the fact that the crisis in the Spanish construction sector is having a dramatic impact on some of their leading professional football clubs.

While moving from life in a law firm into business has become common, Spain is now experiencing the first moves in the opposite direction – as senior in-house lawyers (IHLs) are leaving what has typically been seen as a more comfortable working environment and joining top law firms.

The Spanish Industry Ministry has announced a further 1300km of high-speed rail line to be built in the next four years to connect a further ten cities by AVE at a cost of €7bn. The investment has been advanced to try and diminish the impact that the collapse in the residential building sector is having on employment.

Financings for Iberian firms engaged on motorway projects continue. Financial close has been reached on the €423m Marão toll tunnel project that will link Amarante and Vila Real in northern Portugal. Linklaters was legal adviser to the winning consortium, led by Sacyr's Portuguese subsidiary Somague, while the mandated lead arrangers turned to Morais Leitão.

There is considerable relief amongst Madrid-based lawyers that their tax returns submitted between 2004 and 2006 are not going to be reassessed. The local tax inspector had proposed to treat lawyers as having been employees of their firms prior to February 2006, the date when they were formally incorporated into the Spanish social security system.

The drive to break up cartel activity by companies continues both at the European Commission (EC)and at national levels.

The EC has announced a new settlement procedure for resolving price-fixing investigations while in Spain the National Competition Commission (CNC) has been launching a series of dawn raids on companies now that the leniency option in return for whistle-blowing on cartels has come into force.

Under the new settlement procedure, the EC is prepared to release to companies suspected of operating a cartel some of the information held on them. If the company is persuaded that it has no room for manoeuvre by the evidence and pleads guilty, the Commission can reduce any fine by 10%.

The EC has had to adopt such an approach because of the success of its leniency programme, say lawyers, which has caused a backlog of cases to build up.  By getting companies to admit their guilt rather than contest the allegations the EC hopes to speed up cases and free up investigating resource.

Companies know though that by accepting the fine reduction they automatically lose the right to appeal, which in the past has seen some fines imposed for operating a cartel reduced substantially.

Companies also automatically put themselves at greater risk of private litigation brought by consumers.

The EC procedure differs from the plea bargaining system that operates in the US in that the EC's 10% discount is not negotiable. In the US it is, but the end fine can be very much higher than the 10% of annual turnover limit imposed in the EU. Such a threat can cause parties to settle for a low fine rather than risk a heavy one despite their innocence, say lawyers.

Meanwhile the number of dawn raids has increased dramatically since the CNC was established in September 2007. One of the most impressive was a coordinated raid by inspectors on nine cosmetics manufacturers under suspicion of controlling market share and price-fixing for shower gel and toothpaste. Offices of industry giants Colgate Palmolive, Unilever and Sara Lee were searched. The headquarters of the national association for perfumery and cosmetics was also raided.

 A further raid three days later concentrated on eight manufacturers of professional hairdressing products, who were thought by the CNC to be fixing the prices being charged to salons. This group included top names in the sector such as L'Oréal, Wella, Henkel and Colomer.

The CNC was tipped-off by colleagues in Brussels for both raids, following a whistleblower revealing all to the Commission.

The CNC now has 18 months to prepare a case against all the alleged wrongdoers. Trade associations have become something of a target for the CNC's inspectors, note lawyers, since they are widely suspected of negotiating minimum retail prices to be set for various services as well as standard terms of employment with affiliated trade unions.

Lawyers say there is a potential source of conflict here, since the Unions are committed to achieving standardised employment agreements while the CNC is mandated to achieve competition between employers.

In addition to the raid on the perfumery and cosmetics association raid, CNC inspectors have also called unannounced on the national associations for private security and for call centres, as well the fish transport association of La Coruña and fine wine vintners in Jerez.

A potential issue for Associations´ members is that each can be fined 10% of their annual turnover if the Association is found guilty of operating a cartel.

Competition lawyers report therefore that have never been busier, as they seek to advise clients on the risks they face and what to do if they get raided. The deterrence effect of the new legislation at both the EC and national levels is clearly having the desired impact.

Increasingly competition law is being seen as a priority by in- house counsel and company management boards, with notable recent partner moves including that of former DLA Piper head of competition, Antonio Creus to Bird & Bird, and of Pedro Callol from Allen & Overy to lead the practice
at Roca Junyent.

Further evidence of the competitive pressures on Europe´s airlines has come this week with the announcement of merger talks between British Airways (BA) and Iberia.

The decision by Florentino Pérez, president of ACS, to put up for sale the 45.3% stake held in Unión Fenosa, Spain’s third-largest electricity utility, is seen by many energy lawyers as the starting point for the next phase in the reorganisation of the Spanish energy sector.

Pérez has decided that Fenosa is too small to be an effective competitor against the leading domestic players, Iberdrola and Endesa, and that his 12.7% direct and indirect holdings in Iberdrola will be ineffective unless he stimulates a fundamental restructuring of the whole industry.

However the way ahead is not clear. While the market initially assumed that ACS would sell its Fenosa stake to France’s EdF, it now seems that it is looking for a bidding war to drive prices up beyond the €16/share price that commentators say ACS had pre-agreed with EdF.

Other companies now said to be interested include Gas Natural, E.ON, RWE, Gazprom and GdF-Suez, which already has an 11% stake in Gas Natural. Any bidder would however, under stock exchange rules, have to make a full bid for Fenosa – which would mean finding around €11bn to do so.

The Spanish government would still prefer a merger between Iberdrola and Gas Natural, lawyers say, in order to build a stronger national champion. It will have to move carefully though, as the European Court of Justice recently ruled that Spain illegally defied EU demands to drop restrictions imposed when E.ON tried to acquire Endesa last year.

In any event, Pérez may have a considerable amount of persuading to do if his project is to win favour with the financing banks. He could receive €6bn from the sale of the Fenosa stake and release a further €3bn in funds if he sold his 30% stake in German constructor Hochtief, and 26% holding in infrastructure group Abertis. Such moves might then enable him to potentially buy another 21% stake in Iberdrola, say analysts.

However, ACS has €3.1bn of its outstanding €18.1bn debt due to be serviced this year. Unless the banks see, for example, EdF agreeing to a joint bid with ACS for Iberdrola and perhaps a later merger with Gas Natural they may find it difficult to see existing debt used to fund any further expansion into Iberdrola’s share structure.

 Nonetheless energy lawyers are inevitably on standby. “It is important to have lawyers onside and prepared for any big strategic moves,”  Manuel Garcia Cobaleda Head of Group Legal Services at Gas Natural recently told participants at Iberian Lawyer´s "Listening to Clients" forum. “Companies have in the recent past readily used conflict of interest issues as a tactical legal weapon by instructing a wide range of law firms to advise them on a single transaction.”

Gas Natural retained Freshfields for the 2006 initial bid for Endesa (advised by Clifford Chance) while Iberdrola is now using Uría Menéndez, Linklaters, Allen & Overy, CMS Albiñana and Latham & Watkins to discourage EdF– which itself is advised by Gómez-Acebo & Pombo and Jones Day. ACS has previously used in-house counsel for stake building in both Iberdrola and Unión Fenosa.

Any new sector consolidation may though inevitably see a repeat of the conflict issues experienced when Gas Natural first launched its bid for Endesa. Consequently many of Spain’s mid-size firms will be hoping to emulate the success of Perez-Llorca’s representation of E.On in the same deal, and get a significant share of whatever deals do occur.

Corporate M&A lawyers report that they are quickly adjusting to the new M&A scenario in the first half (H1) of 2008: no megadeals, some interesting trade sales often instituted by family owners and a handful of private equity operations. 

The sale of Anglo-Dutch Unilever’s premium olive oil and vinegar business to Spain’s leading listed food company, SOS Cuetara was a classic trade acquisition. SOS, using legal advisors Gómez-Acebo y Pombo, paid €630m for the Unilever division, which includes the Bertolli olive oil brand, America’s favourite. Gómez-Acebo worked with the UK’s Travers Smith, while Unilever turned to Uría Menéndez’s best friend Slaughter & May.

Ángel Varela led the team of lawyers at Gómez-Acebo y Pombo. 

Also on the food front was the long-expected merger between US-headquartered Smithfield and listed Spanish meat processor Campofrío, subject to achieving the CNMV’s exemption from a full takeover. Campofrío, still partially owned by the Ballvé family, used Baker & McKenzie for its legal advice while Cuatrecasas was mandated by Smithfield. 

In the energy sector Corporación Alba, the investment vehicle of the March family, sold its 26% stake in Isofotón, Spain’s largest solar panel manufacturer, to distributor Bergé, advised by Cuatrecasas. It received the same price as it paid for it a year ago - €150m. Alba abandoned Isofotón because it failed to achieve a stock market listing. 

Another family sale was the €100m disposal by the Gómez and de Blas families, counselled by Garrigues, of their Madrid-based bus operations to UK transport operator Arriva, advised by Cuatrecasas. 

Private equity deals have also stimulated the mid-tier market, but with restrained financing leverage. Mercapital backed a €180m MBO of Obras Subterráneas, the Spanish tunnelling specialist. A&O was hired by Mercapital, Cuatrecasas’ advised the sellers, the Figar family, while Clifford Chance worked on the financing arranged by Santander and Italy’s Unicrédito.  

On the mergers front, low cost airlines Clickair and Vueling agreed a provisional plan to combine their operations. Clickair owners Iberia is likely to hold a 40% stake in the new company, 10% above the compulsory bid threshold, but its legal advisor, Allen & Overy, has to persuade the CNMV against a mandatory takeover bid.  

The lack of big deals seems to have punished the international firms. According to Mergermarket’s 2008 H1 report the three Iberian heavyweights, Cuatrecasas, Garrigues and Uría Menéndez reported 57 deals between them while Linklaters, Freshfields, Clifford Chance and Allen & Overy closed 24.  

And despite the recent impetus provided by Santander´s acquisition of Alliance & Leicester and the British Airways / Iberian merger, feedback from Iberian General Counsel suggest that the English elite is now looking for business in the mid-market at rates that are lower than during the days of the megadeals.

As one Madrid partner told Iberian Lawyer: “With fewer operations around, the pressure will be on the mid-tier M&A specialists, like Araoz & Rueda, CMS Albiñana and Pérez-Llorca to defend their territory.”

The Mergermarket H2 report will show the extent to which they have been successful.

The Madrid offices of Cuatrecasas and Garrigues have advised on the acquisition of Madrid-based bus operator Empresa De Blas y Cia by UK-listed transport group Arriva for €100m.

Some of Spain’s most prominent law firms may now be being asked to take sides in the multi-billion insolvency of Martinsa-Fadesa, one of Spain’s leading property groups.

Uría Menéndez is among the law firms leading Banco Santander’s £1,259m (€1.54bn) recommended offer for UK savings and loans bank, Alliance & Leicester (A&L), in what is the Spanish bank's second significant UK acquisition.