Latin Finance - September/October 2009 - 73

legal services Mergers and Acquisitions – The Brazilian Market by Carlos Alberto Moreira Lima Jr., Partner, Pinheiro Neto he M&A landscape in Brazil has changed greatly in the past twenty-five years. Back then, companies and their shareholders, executives, auditors and lawyers were all stepping into a new arena together. And, in spite of the several practical, cultural and conjectural difficulties involved (including vices, liabilities, or a family management history), many foreign investors were interested in buying an ongoing business rather than merely channeling their funds into a business starting from scratch. But Brazil now stands out as an international player in the M&A arena. The flow of business has remained steady over recent years, and the number of M&A deals has grown sharply: up from 392 deals in 2002 to over 640 in 2008, which is even more impressive taking into consideration the economic downturn from the second semester of 2008. The largest and most relevant recent M&A transactions in Brazil, in which our firm was involved, include: (i) McDonald’s sale of all its Brazilian assets to a consortium for US$ 700 million; (ii) the sale by all individuals of five different families that controlled Ipiranga Group, Brazil’s second largest fuel distributor, to a consortium composed of Petrobras, Braskem and Ultra Groups for approximately US$ 4 billion; (iii) the sale of 100% of the equity interest of DM Indústria Farmacêutica Ltda. to Hypermarcas S.A. for R$ 1.3 billion; (iv) Rio Tinto Group’s sale of its Brazilian assets to Vale for US$ 1.6 billion; (v) the sale of 50% of the equity interest of FARMASA to Setiba Participações S.A. for R$240 million; and (vi) Carrefour’s acquisition of Atacadão for US$ 1.1 billion (what placed Carrefour as the number one food retailer in Brazil in terms of sales). If most deals until the early 1990s revolved around the sale of Brazilian family-run companies to foreign investors (mostly due to succession problems or fear of international competition), the current scenario is rather more diverse. T Besides the traditional deals, M&A transactions comprise: (i) Brazilian investors acquiring foreign-based companies, which was simply unimaginable a few years ago; (ii) foreign strategic or financial investors acquiring Brazilian companies, requiring extensive due diligence, and negotiation of sometimes complex contractual mechanisms, such as escrows, holdbacks, put and call options. We have assisted clients in the recent past in deals like this with shotgun clauses, for example; (iii) the acquisition of Brazilian listed companies, giving rise to discussions about complex issues such as public tender offers to minority shareholders (tag-along), poison pills, corporate reorganizations, etc.; (iv) the merger of Brazilian listed companies, followed by the creation of a Brazilian corporation without a defined controlling shareholder; (v) the creation of new holding companies in Brazil or abroad by way of contribution of equity interests in Brazilian and foreign companies engaging in the same core activity, thus generating a new transnational company; and so forth. M&A deals are though still incipient at regional level in Latin America. Except for a few cases involving Argentine, Brazilian, Chilean, Colombian and Mexican companies, Latin American countries are yet to muscle up a volume of cross-border transactions with their neighboring countries. Nevertheless while Latin American countries await the push of political and economic stability to gain some regional momentum, Brazil will still continue to benefit from the AngloSaxon and European rising tide of international M&A. n Pinheiro Neto Advogados Carlos Alberto Moreira Lima Jr., Partner Phone: +55 11 3247-8570 Fax: +55 11 3247-8600 Email: clima@pn.com.br Website: www.pinheironeto.com.br September/October 2009 LatinFinance 73 guide
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Latin Finance - September/October 2009

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