Culturally Divisive: BBVA’s Experiment in Hubris*

November 20^th 2025 marks 50 years to the day since Spain’s military dictatorship came to an end, following the death of General Francisco Franco. Franco left a complex legacy, which the murderous civil war (1936-39), an attempted military coup in 1981, and Catalonia illegally declaring independence in 2017, has never completely resolved. As part of the post-Franco constitutional settlement, three distinct cultural regions of Spain, Galicia, Catalonia and the Basque Region, were deemed ‘protected national areas’ with their own language and cultural identity sitting aside a wider ‘Spanish’ identity. In Spain culture resonates and matters deeply.  

This is perhaps pertinent now that the dust has settled on the complete ‘Horlicks’ Basque based Bank, BBVA made of its attempted takeover of smaller Catalan rival, Sabadell. Mergers, acquisitions and takeovers are the life blood of capital markets and are generally promoted in the interests of cost synergies and diversified, value accretive, revenues. There was a certain logic in BBVA’s approach; Europe is generally over banked and consolidation would benefit returns and efficiencies. Unfortunately, banks are not like other stocks, and, as was to play out, corporate M&A deals rarely, if ever consider culture alongside some often-spurious economics.  

We would contend that culture can often matter as much as financials; consider, for instance, the merger of Standard Life and Aberdeen Asset Management in the UK, in which two wholly alien cultures came together to forge a fairly disastrous and hostile marriage. Both of those parties were Scottish and both entered into a willing alliance; how much more catastrophic is a deal when the proposed takeover is hostile and culturally divisive.

BBVA’s assault on Sabadell endured for 18 long months, with some surprising twists and turns. Spain’s fairly concentrated banking market comprises retail and international institutions that are both public and private. By value the list is headed by Santander, with BBVA, based in Bilbao, ranked #2 by assets. Banco Sabadell, headquartered in Sabadell, Catalonia is ranked #4. A tie up between BBVA and its smaller rival would, the theory went, be both transformative and enable the combined entity to leapfrog Santander.

BBVA first made its €14.9bn all share offer in April 2024, citing €900m of synergies as the main driver. The Spanish markets regulator approved the bid in September, which was followed by a small improved offer. Sabadell from inception rejected the bid and maintained a steely stance that remaining independent would be in the best interests of shareholders, given its ability to provide higher returns. During the increasingly hostile process, Sabadell owned lender TSB, was sold to Santander to give the Catalonian bank a ‘war chest’. This should have remained a logical economic deal in which relative arguments were ultimately decided by both sets of shareholders. Very unusually, the Spanish Government intervened, stating its opposition to the merger, and that if it went ahead, it would use regulatory power to prevent a legal tie-up for three years, thereby putting in doubt the core cost savings rationale. Spain’s ability to do this in practice was then challenged by Brussels, which had approved the merger, saying Spain had no agency to prevent the deal from proceeding in full. A war or words between the two managements and involving Governments, suggested any eventual deal could potentially be very destructive; BBVA at one point filed a complaint with the regulator accusing Sabadell of dirty tricks.

In early October, Sabadell went to the extraordinary length of placing full page advertisements in the financial press urging shareholder rejection; ’the choice is simple. Sabadell is stronger alone’. The ad, point by point, countered BBVA’s arguments; that it had a clear plan for remaining independent, that BBVA’s offer was entirely in shares, and fundamentally undervalued the bank. Sabadell undertook to return €6.45bn or 40% of the bank’s market cap over the next three years. Sabadell urged shareholders to vote decisively as acceptances in the region of 30-50% would lead to more painful uncertainty, and a probable revised offer from BBVA. In the event the tie-up was rejected by 75% of Sabadell stock owners representing a crushing humiliation for BBVA’s pugnacious management.

A hostile, divisive and distracting bid had ended in extreme failure for BBVA. One can read so much into this saga; a larger, culturally aloof entity making a hostile, unwanted all-paper takeover bid at a tiny premium for a smaller rival that, itself had a distinctive, regional culture, important to Catalonia. A takeover by a Basque entity would no doubt have led to Sabadell losing its regional identity and branch network as BBVA imposed emotionless cost controls.

In most cases, mergers that are so forcefully rejected by the target would lead the hostile party walking away. In the long run such bitter hostility destroys trust and any ability for the two managements to work together equitably. Large swathes of Sabadell personnel would no doubt have quit, forcing a further period of attrition and drift, with the merger becoming bogged down in acrimony. Culture may not often be the presiding decider for an effective merger, but quite often it is the human glue that makes it work – or not.

*WHITEFRIARS has no holdings in Spain