The Brazilian mergers and acquisitions market was relatively stable for years, but gained traction in 2021. Foreign dealmakers see room for further growth in 2022: despite recent appreciation, the local currency has overall lost significant value against the world’s anchor currencies since the covid-19 pandemic broke out.
These dealmakers know that the next presidential election scheduled for October may bring political upheaval and that the candidates’ plans for the economy for the 2023-2026 term are still vague – at best. Yet, assets are cheap and long-term profitability prospects continue to be attractive.
While foreign investors focus on anticipating scenarios given domestic and international uncertainties, they sometimes overlook how their M&A agreements are being structured and negotiated under local law. This can prove a great mistake and harm the expected return on investment.
This edition of LS Brazil Outlook is a joint venture between our dispute resolution and M&A/corporate practices. We bring to you our views on how some key provisions in M&A transactions can be affected by Brazilian law and what to do to mitigate those risks.
The use of sandbagging clauses in M&A transactions must be assessed with care when the relevant agreement is governed by Brazilian lawRead more
M&A deals often raise uncertainties about the actual value of a business. Earnout clauses are widely used to address that concern by tying the value of a deal to future business targets. However, they may cause potential disputesRead more
Put and call options are widely adopted in Brazilian M&A practice. Although courts have endorsed their enforceability, aspects such as the option pricing method should be negotiated carefullyRead more
Contractual penalties are convenient means of protecting crucial party rights in M&A transactions. Due to peculiarities of Brazilian contract law, crafting well-rounded penalty clauses may reduce the risk of court intervention over such provisions...Read more