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In the corporate finance ecosystem, private equity occupies a singular place. It is not simply “investment capital”: it is a well-oiled machine of acquisition, transformation and divestment that has been behind some of the most significant transactions in the Spanish and international markets. Understanding how it works \u2014 and what role leveraged buy-outs (LBOs) and special purpose vehicles (SPVs) play within that machine \u2014 is essential both for the financial adviser and for the business owner contemplating a corporate transaction.<\/strong><\/p>\n This article analyses the fundamentals of private equity, describes the mechanics of an LBO, explains the structural function of SPVs and addresses the legal and tax aspects that condition how they operate in Spain. Because understanding the financial buyer’s logic is, for the business owner considering a sale, a real negotiating advantage. That logic is exactly what we put on the seller’s side when we run a company sale \u2013 M&A transaction<\/a>.<\/p>\n Private equity comprises investment funds that raise capital from institutional investors \u2014 pension funds, insurers, family offices, high-net-worth individuals \u2014 in order to invest it in companies that are not listed on public markets. Unlike a stock-market investor who operates with relative liquidity, the private equity fund acquires a significant or majority stake in a company, works actively on its transformation over a set period and, at the end of that horizon, executes its exit, maximising the return for its investors.<\/strong><\/p>\n The typical time horizon ranges from three to seven years<\/strong>. During that time, the fund is not a passive shareholder: it intervenes in management, imposes financial discipline, drives organic and inorganic growth and professionalises structures that in many family businesses have operated informally for decades.<\/p>\n Private equity in Spain has reached notable maturity in the middle-market segment \u2014 companies with EBITDA of between \u20ac3 and \u20ac30 million. Funds specialising in this segment look for businesses with a defensible competitive position, predictable cash flows and potential for operational improvement. The perfect company for an LBO is not necessarily the largest or the most glamorous: it is the one that generates cash consistently.<\/p>\n The Leveraged Buy-Out (LBO) is the acquisition technique most characteristic of private equity. Its logic is simple in its formulation: the fund acquires a company combining its own capital (equity) with financial debt, so that the latter finances a substantial part of the purchase price. The debt sits on the balance sheet of the acquired company, which repays it from its own cash flows over the investment period. <\/strong>When it is the managers themselves who lead that leveraged purchase, we speak of a Management Buy-Out (MBO)<\/a>, a very common variant in generational handovers.<\/p>\n In a classic LBO, debt represents between 50% and 75% of the acquisition price, depending on the sector, the visibility of cash flows and the conditions of the credit market. The rest is contributed by the fund as equity. This structure amplifies the return on the capital invested:<\/strong> if the value of the business grows and the debt is repaid, the return to the shareholder is multiplied by the effect of leverage.<\/p>\n The counterpart is risk<\/strong>. A highly leveraged structure is sensitive to any deterioration in cash flows. That is why funds analyse adverse scenarios in detail and require the company to generate enough cash to service the debt even in stress situations. The financial discipline an LBO imposes is, in a sense, one of the value-creation mechanisms: it forces efficient management and the elimination of inefficiencies that in other circumstances might be postponed indefinitely. Negotiating that acquisition debt \u2014 tranches, security and terms \u2014 is one of the areas where a structured financing<\/a> adviser adds value.<\/p>\n Not every company is a suitable candidate for an LBO. Funds generally look for companies that meet several criteria:<\/strong><\/p>\n Many family businesses in the Spanish middle market fit this profile: solid businesses, well positioned in their niche, with historically stable margins and cash flows, but with room for improvement in their management structure or growth strategy.<\/span><\/p>\n Every private equity transaction is structured through specific corporate structures. The Special Purpose Vehicle (SPV) \u2014 or instrumental holding company \u2014 is the central piece of that structure: a newly created entity, set up exclusively to manage the transaction. In an LBO, the fund creates an SPV which, formally, takes on the debt and acquires the shares of the target company. Subsequently, and for reasons explained below, that SPV is usually merged with the acquired company itself.<\/p>\n We analyse this vehicle in depth in the article on what an SPV is and how it is used in complex financial structures<\/a>.<\/p>\n The SPV has four key functions:<\/strong><\/p>\n The holding company that results from these structures also has its own valuation and sale implications, which we address in holding company: valuation and sale<\/a>.<\/p>\n One of the most relevant \u2014 and least known \u2014 aspects of structuring an LBO in Spain is the financial assistance prohibition established by the Spanish Companies Act. Specifically, articles 143.2 (for private limited companies) and 150 (for public limited companies) prevent a company from providing financing, granting security or giving assistance of any kind for the acquisition of its own shares or those of its parent company. In practical terms: the assets of the company being bought cannot directly serve as collateral for the loan with which the buyer finances that same purchase. <\/strong><\/p>\n We have devoted a full article to this critical point: the financial assistance prohibition in LBOs and MBOs<\/a>, with the most recent case law and safeguards.<\/p>\n The usual solution is the leveraged merger:<\/strong> once the acquisition has been completed through the SPV, the SPV merges with the operating company. In this way, the acquisition debt is integrated into the balance sheet of the resulting entity, whose operating activity generates the cash flows needed to repay it<\/strong>. The merger “purges” the potential infringement because the assets are definitively devoted to a single consolidated business activity.<\/p>\n Since the entry into force of Royal Decree-Law 5\/2023 on structural modifications of commercial companies, the process for these mergers has been simplified in some formal respects, but transparency requirements have been strengthened: the merger plan must explicitly detail the financial resources envisaged and the debt repayment schedule, and the directors’ report must include an economic and financial plan justifying the solvency of the resulting entity. A genuine economic rationale \u2014 beyond a purely tax-driven interest \u2014 is an essential requirement.<\/p>\n The Spanish tax framework introduces a significant limitation that every fund \u2014 and every business owner negotiating with one \u2014 should know. As a general rule, article 16 of the Corporate Income Tax Act (LIS) establishes that net financial expenses are deductible only up to 30% of operating profit (adjusted EBITDA), with deductibility of up to one million euros a year guaranteed in all cases.<\/strong><\/p>\n But the real tax challenge of leveraged mergers lies in paragraph 5 of that same article. In its most restrictive application, it prevents the financial expenses of the acquisition debt from being deducted against the operating profit contributed by the acquired company when the merger or the incorporation into the tax group takes place within four years of the purchase. Since the SPV holding company has no activity of its own, this restriction could completely neutralise the tax shield of the structure.<\/p>\n However, the article itself provides a safe-harbour clause that excludes the limitation if two conditions are met:<\/strong><\/p>\n The Directorate-General for Taxation, in binding ruling V1664-15, has clarified that the reduction can be applied flexibly to any of the existing debt tranches, and that extraordinary repayments in one year can be accumulated and applied to future years. In practice, this makes the debt repayment schedule a tax-planning variable as important as the interest rate negotiated itself.<\/p>\n One of the most frequent misunderstandings about private equity is to think that the return is generated solely by leverage. In reality, leverage amplifies the return, but does not create it. Value is generated mainly during the investment period, through three complementary levers:<\/strong><\/p>\n In the Spanish market, the Buy & Build strategy has been behind some of the sector’s most successful cases<\/strong>. Portobello Capital executed the consolidation of Grupo CTC in operational and logistics outsourcing until it exceeded \u20ac150 million in turnover. Nazca Capital supported L\u00e3berit with a capital increase specifically aimed at financing selective acquisitions and consolidating its position in software development. The pattern is always the same: a solid platform company, successive acquisitions at a lower multiple, exit at a higher multiple that captures all the value created. Professionalising financial management to sustain that growth is precisely the function of a fractional CFO<\/a>.<\/p>\n From the first day of the investment, the fund is thinking about the exit. Not because it does not believe in the business, but because its mandate is to generate a return for its investors within a set period, and that return only materialises when the divestment takes place. The three usual routes are:<\/strong><\/p>\n The divestment process is prepared months in advance: updating the business plan, normalising EBITDA, preparing the vendor due diligence report and selecting potential buyers. The objective is exactly the same as when the fund was the buyer: maximise the price and minimise the risk of the deal collapsing during the process. That vendor due diligence<\/a> report is one of the levers that most reduces the discount demanded by the buyer.<\/p>\n If you are considering the total or partial sale of your company<\/a>, a good understanding of private equity logic can change the outcome of the negotiation.<\/p>\n A fund studying your company thinks in terms of an equity story:<\/strong> what is the improvement potential? How much debt can this company carry on its balance sheet? At what multiple will I be able to sell it in five years? That means the price offered depends, in part, on the fund’s view of future potential, and not only on historical results.<\/p>\n For the selling business owner, this has very specific practical implications:<\/p>\n Knowing how this whole journey is organised helps you arrive prepared: we detail it in the stages of the business sale process<\/a>. And if the company carries a strained debt structure before the transaction, it is advisable to address it through a prior restructuring or refinancing<\/a>.<\/p>\n Private equity, leveraged buy-outs and SPVs are pieces of the same financial architecture, designed to acquire companies, transform them and sell them, generating a return. Understanding that architecture \u2014 its internal logic, its legal and tax constraints and its objectives \u2014 is relevant whether you are considering selling your company to a fund or simply want to understand better the environment in which you operate.<\/strong><\/p>\n At Maraz Corporate Finance we advise at every stage of the M&A process<\/a>: from the valuation<\/a> and preparation of the transaction to negotiation with the buyer and closing. If you are analysing a corporate transaction, we will be glad to support you.<\/p>\n <\/p>\n Javier de Rojas Roca de Togores<\/strong><\/span><\/a><\/p>\n Partner – Maraz Corporate Finance<\/strong><\/span><\/p>\n <\/p>\n Both are leveraged buy-outs<\/strong> (financed mostly with debt backed by the company’s cash flows). The difference lies in the buyer: in an LBO it is usually a fund or an external investor; in an MBO (Management Buy-Out)<\/a> it is the company’s own managers who acquire it.<\/strong> The MBO is therefore a particular case of LBO.<\/em><\/p>\n Because the SPV<\/a> isolates the risks of the transaction<\/strong> (the debt and liabilities are contained in the vehicle, without contaminating the fund’s other portfolio companies), makes it possible to optimise the debt structure and the tax position, and provides flexibility when there are co-investors or different debt tranches. After the purchase, the SPV is usually merged with the acquired company.<\/em><\/p>\n Not directly: the financial assistance prohibition<\/strong> (articles 143.2 and 150 of the Spanish Companies Act) prevents it. The usual legal route is the leveraged merger following the purchase via an SPV, which must meet requirements of transparency and genuine economic rationale. We explain this in detail in the article on the financial assistance prohibition in LBOs and MBOs<\/a>.<\/em><\/p>\n Companies that generate cash in a stable and predictable way, with low cyclicality, positive normalised EBITDA, little existing debt<\/strong> (to leave room for leverage), potential for operational improvement and a management team capable of running the business during the investment period.<\/strong> Many family businesses in the Spanish middle market fit this profile.<\/em><\/p>\n By normalising EBITDA before going to market, building an equity story consistent with the historical data, arriving with an up-to-date vendor due diligence<\/a> report and planning the structure of the sale in advance<\/strong>. An M&A adviser<\/a> who understands the financial buyer’s logic is best placed to balance that negotiation.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" < LBOs and SPVs In the corporate finance ecosystem, private equity occupies a singular place. It is not simply “investment capital”: it is a well-oiled machine of acquisition, transformation and divestment that has been behind some of the most significant transactions in the Spanish and international markets. Understanding how it works \u2014 and what role […]<\/p>\n","protected":false},"author":3,"featured_media":2047,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[163],"tags":[],"class_list":["post-5160","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mergers-acquisitions"],"acf":{"team_member_autor":{"ID":1417,"post_author":"3","post_date":"2025-03-17 16:11:58","post_date_gmt":"2025-03-17 15:11:58","post_content":"","post_title":"Javier de Rojas Roca de Togores","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"javier-de-rojas-roca-de-togores","to_ping":"","pinged":"","post_modified":"2026-10-07 13:24:42","post_modified_gmt":"2026-10-07 11:24:42","post_content_filtered":"","post_parent":0,"guid":"https:\/\/maraz.es\/?post_type=team_member&p=1417","menu_order":0,"post_type":"team_member","post_mime_type":"","comment_count":"0","filter":"raw"}},"_links":{"self":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/posts\/5160","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/comments?post=5160"}],"version-history":[{"count":0,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/posts\/5160\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/media\/2047"}],"wp:attachment":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/media?parent=5160"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/categories?post=5160"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/tags?post=5160"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What is Private Equity?<\/strong><\/h2>\n
LBOs: leveraged buy-outs<\/h2>\n
Typical financial structure<\/h3>\n
Target company profile<\/h3>\n
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SPVs: the vehicle that structures the transaction<\/h2>\n
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The legal framework in Spain: the financial assistance prohibition<\/h2>\n
The tax treatment of LBOs in Spain: article 16.5 of the Corporate Income Tax Act<\/h2>\n
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Value creation: what happens after the purchase<\/h2>\n
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The exit strategy<\/h2>\n
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What does all this mean for the selling business owner?<\/h2>\n
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Conclusion<\/h2>\n
Frequently asked questions about Private Equity, LBOs and SPVs<\/em><\/h2>\n
What is the difference between an LBO and an MBO?<\/em><\/h3>\n
Why does a private equity fund buy through an SPV rather than directly?<\/em><\/h3>\n
Is it legal in Spain to finance the purchase of a company with its own assets?<\/em><\/h3>\n
What type of company does a fund look for in an LBO?<\/em><\/h3>\n
If I sell my company to a fund, how can I best defend the price?<\/em><\/h3>\n