Investment opportunities arising when a company faces exceptional circumstances — financial distress, shareholder conflicts, restructuring processes, or forced divestments — that create an acquisition window at prices below intrinsic value.
Not all good companies are sold for the usual reasons — retirement, growth, consolidation. Some are sold — or need a partner — because something has broken: the financing, the relationship between shareholders, the strategy, or the owner’s ability to continue at the helm. These are special situations — the segment of the market where opportunity emerges from difficulty, and where investors capable of acting with speed and judgement find some of the best risk-adjusted returns.
Special situations is a broad term encompassing investment opportunities that arise when a company, an asset, or a group of assets is in exceptional circumstances that distort its price relative to its true value. The common denominator is a disconnect between what the business is worth under normal conditions and what can be paid for it at that particular moment.
The most frequent special situations in the Spanish mid-market are:
Companies in financial distress. Operationally viable businesses with an unsustainable debt structure, liquidity problems, or missed payment obligations. The problem is in the balance sheet, not the income statement.
Shareholder conflicts. Irreconcilable disagreements between partners that paralyse management and force a divestiture. The seller is negotiating from the urgency of resolving the conflict, not from the strength of someone choosing to sell.
Failed succession processes. The founder has died or become incapacitated, the heirs lack the ability or willingness to manage, and the company urgently needs a new owner-operator.
Corporate carve-outs. A large group sells a subsidiary or division that no longer fits its strategy. The subsidiary may be an excellent business, but the parent sells it at a discount because it wants to focus on its core business and the separation process is complex.
Regulatory situations. Regulatory changes that force a company to divest certain assets or exit certain markets (for example, antitrust requirements following a merger).
Distressed debt. Purchasing the debt of a distressed company at a discount, with the aim of converting it to equity or participating in the restructuring from a position of strength.
The reason is straightforward: the price reflects the exceptional circumstances, not the value of the business. An entrepreneur in conflict with their partner accepts a below-optimal price because their priority is to exit the situation. A financially distressed company sells at a discount because creditors prefer to recover something today rather than risk everything in insolvency. A group divesting a subsidiary accepts a lower price because the buyer is taking on the complexity of the separation.
To capture these opportunities, the investor needs three capabilities that not everyone possesses:
Speed of analysis and execution. Special situations have short windows. There is no time for six-month competitive processes. The investor who can evaluate an opportunity in weeks (not months) and close a transaction quickly has a decisive advantage.
Tolerance for complexity. These deals are inherently complicated: convoluted legal structures, hidden liabilities, conflicts between parties, regulatory uncertainty. An investor who only knows how to execute clean, straightforward transactions does not operate in this segment.
Post-acquisition management capability. Buying a distressed company is only the beginning. It must be stabilised, restructured, and relaunched. This requires operational experience, access to management talent, and the patience to execute a turnaround that may take two to three years.
Returns from special situations tend to exceed those of conventional M&A transactions for two reasons:
However, the risk is also greater. Not all distressed companies are recoverable. Some have irreversible structural problems (terminal market decline, obsolete technology with no alternative, irremediable environmental contamination). The investor’s skill lies in distinguishing between companies with solvable problems and companies with terminal ones.
A family-owned food group with three factories and 60 million in revenue is in a complex special situation: the patriarch died two years ago, the two family branches (children from the first and second marriage) are not speaking, management is paralysed, the general manager has resigned, banks have placed the debt under watch, and two key customers are evaluating alternative suppliers.
Blue Mountain acts quickly. Within four weeks, we conduct a preliminary analysis and present a binding offer for 100%: purchase of both family branches’ shares at 5x EBITDA (against a sector average of 7x), subject to a 6-week confirmatory due diligence. Both branches accept because the alternative — continued deadlock while the company deteriorates — is worse.
Due diligence confirms that the underlying business is sound: recognised brands, stable distributor contracts, modern equipment, a competent middle management team. The problems are all about governance and management, not operations. Blue Mountain closes the transaction, appoints an experienced CEO, renegotiates the bank facilities, and stabilises key customer relationships. Eighteen months later, EBITDA has returned to its historical level of 7 million and the company is operating normally.
Not if done rigorously. The key is analysis: distinguishing between a company with a transitory problem (which can be solved) and a company with a structural problem (which cannot). A disciplined special situations investor rejects more opportunities than they accept. The rejection rate is very high because most special situations carry more risk than they initially appear to.
No. Special situations are one of our investment segments, but not the only one. We also invest in healthy companies in the context of generational succession, growth, and sector consolidation. The difference is that in special situations, the complexity of the transaction acts as a barrier to entry that reduces competition and provides access to more attractive valuations.
These are fast transactions by necessity. From first contact to closing, a special situations transaction typically takes 8-16 weeks, compared to 4-9 months for a conventional deal. The urgency of the situation dictates the timeline, and an investor who cannot move at that speed loses the opportunity.
If you wish to explore a potential collaboration or present an investment opportunity, we invite you to contact us. We guarantee absolute confidentiality in all our conversations.