A Captive Sabadell

The Objective, October 19, 2025

After the failure of BBVA’s takeover bid for Banco Sabadell, markets spoke clearly. BBVA’s shares rose by almost six percent; Sabadell’s fell by nearly seven. The combined value of both banks increased, but unevenly. BBVA’s shareholders won, Sabadell’s lost — and in the long run, Catalonia also loses.

In 2024, seeking to gain scale and balance its business portfolio, BBVA launched a public tender offer to absorb Sabadell and create a larger, more competitive, and more diversified group. The economic logic was clear: Europe needs banks large enough to invest in technology, bear regulatory costs, and compete globally. Compared with the United States or China, Europe’s banking sector remains fragmented. If we want to compete, we need fewer borders and more mergers. Yet here, we block them.

Sabadell’s board rejected the offer. Encouraged by Catalonia’s business establishment, Spain’s government imposed conditions that discouraged and politicized the deal — notably a requirement to keep both banks separate for at least three years, a political intrusion now under investigation by the European Commission.

Partly because of those conditions, and hoping for a second offer at a higher price, most Sabadell shareholders ended up rejecting the bid. Meanwhile, as part of its defense, Sabadell’s management sold assets, raised dividends, and moved its headquarters back to Catalonia, which it had left after the procés crisis of 2017.

Given its smaller size, Sabadell now faces a more uncertain future. The market’s verdict was immediate. BBVA seems to have freed itself from a deal whose profitability had become doubtful. Sabadell, instead, remains tied to a Catalonia marked by political risk and economic stagnation. Despite its urgent need to grow, it is in no position to acquire — and even less to be acquired. Some speculate about a merger with Unicaja, but it is more likely to be absorbed by a foreign bank in the next downturn.

For Catalonia —though not for its political and business elites— it would have been healthier for Sabadell to pass into external hands. A management accountable to global shareholders would be freer from local political pressure and more focused on efficiency. Efficiency requires autonomy from those vested interests that today celebrate the failure of the bid.

The outcome reinforces the opposite model: one based on “relationships” rather than merit, on firms dependent on political favor, on governments that confuse neutrality with tutelage, and on regions that see scale as a threat. Those local roots risk reviving an old Spanish tradition under modern guise: clientelism. All this reduces the appeal of investing, in both Spain’s financial system and Catalonia’s economy.

This politicization not only distorts markets; it also erodes the separation of powers in its economic dimension. When governments decide who may buy or merge with whom, political power seeps into the sphere that should be governed by markets and law, not by ministerial discretion. What was once a legal principle —the autonomy between state and enterprise— is turning into a political privilege.

As usual, the government’s role was decisive. Political interference is nothing new. Europe —and Spain in particular— has spent decades, especially since the pandemic, shielding executives from their own shareholders and doing so selectively. Rules that make takeovers harder are justified in the name of jobs or sovereignty, but in reality they protect entrenched interests, reduce competition, and harm both corporate growth and reputation. Managers grow complacent, boards entrench themselves, and firms lose dynamism.

The lesson is simple. The market for corporate control —hostile takeovers included— does not destroy companies; it improves them. It is the most effective way to replace managers and renew large organizations. Takeovers are, in essence, the mechanism that allows inefficient management to be replaced by those who believe they can do better. In a healthy market, that possibility keeps executives alert and ensures accountability when performance stagnates.

When politicians block the market for corporate control, they are not defending the public interest but their own power. What emerges is a system of mutual protection between politicians and executives: they shield each other from the scrutiny of shareholders and citizens alike. We all pay the price — with less competition, less innovation, and slower growth.