A whirlwind few days in Spain – a flurry of business meetings at fashion kingpin Zara, Banco Santander, and telecom giant Telefónica. Super late nights, early automated wake-up phone calls. After meeting with these three powerhouse companies, we came away impressed with their extensive internationalization over the last decade. These companies mean more to Spain than probably any three in the U.S. Banco Santander and Telefónica have their own self-contained complexes on the outskirts of Madrid.
While these three companies employ large numbers of Spaniards and reap healthy profits, Spain falls short is in its productivity in middle and smaller sized businesses. Spain is starting the painful and long-overdue process of reforming its labor system, hoping to boost sagging productivity, reduce unemployment and spark latent entrepreneurial spirit in the country. Interestingly, after some discussion with the country’s leaders, we learned that cultural reasons can be largely attributed to Spain’s lack of innovation and tepid venture capital industry. Many people view failure of a business as untenable and people generally operate under a much more conservative approach to business.
Public policy measures to stimulate investment in start-ups and encourage innovation will be critical for building viable mid-sized businesses. Even Telefónica has its own, albeit small, venture capital arm to fund early stage businesses. The process of tweaking Spain’s business culture will no doubt take time, but it was encouraging to see many of the country’s top business leaders on the same page with what steps need to be taken.
After a solid dose of Barcelona’s cultural and nightlife scene, Chazen Spain had its first set of meetings today at IESE, a top European business school, based in Barcelona. Our first roundtable focused on private investment in Spain and the broader European region. Despite the gloomy backdrop of European fiscal crises and Spain’s stubbornly high unemployment (currently at 23%), the mood of the panel was optimistic. The panelists, representing Carlyle, Miura Private Equity, and VC shop Nauta Capital, stressed the difficulty of finding the right management teams – willing to sell at the right prices. Sector consolidation, opportunistic expansion, add-on acquisitions and revolutionary technology could provide the impetus for attractive returns looking forward.
Next, we discussed the importance and management of family businesses throughout Spain with three senior executives from Havas Media, Puig Corporation and Leti Laboratories. Family-owned businesses account for the lion share of overall GDP output in the country; effectively managing the delicate inter-generational transitions is crucial for these corporate dynasties. The notions of robust governance principles and being overly communicative with other family executives were underlined across the board. Judging from the three panelists’ level of familiarity with one another and other family-owned companies, the business climate in Spain is undoubtedly a small, tight-knit community.
Props to Borja Olaso and Ignacio del Valle for orchestrating a gnarly trip so far. On to Galicia in northwest Spain tomorrow to meet executives from Inditex (parent company of Zara). More to come.