Mergers & Acquisitions 2019

1. Overview

   Brazilian law applicable to M&A transactions

   The purchase and sale of companies or businesses in Brazil is governed mainly by: (i) the chapter on the law of obligations of Law No. 10,106 of January 10, 2002 (Brazilian Civil Code); (ii) certain provisions of Law No. 6,404 of December 15, 1976 ("Brazilian Corporation Law"); (iii) Law No. 6,385 of 1976 December 7, 1976, which created the Brazilian Securities and Exchange Commission ("CVM"); and (iv) Provisional Measure 881/2019 ("Economic Freedom Act") - recently issued by the Brazilian President and explored deeper in the sections below.

   Public listed companies involved in M&A transactions (either as acquirers or targets) shall also comply with rules (and interpretation/opinions) enacted by CVM, which address disclosure of information, fiduciary duties of officers and directors, and obligations of controlling shareholders, among others.

   There are self-regulatory statutes that may impose additional rules for public listed companies. For instance, the Brazilian Corporation Law ensures an 80% tag-along for holders of common shares in the event of a sale of control, and additionally, by virtue of having adhered to a superior governance standard on the Brazilian Stock Exchange (or "B3"), several listed companies have increased such percentage to 100% and included all types of shares, if applicable.

   Most deals (including those involving public company targets) are privately negotiated with controlling or large shareholders. Tender offers to acquire control of Brazilian companies are still rare. The main rule dealing with tender offers (CVM Rule No. 361/2002) requires any tender offer to be fully guaranteed by an intermediary (broker, dealer or financial institution) and to be irrevocable and not subject to conditions (except for conditions which are not under the offeror's control). Mandatory tender offers after a sale of control are sometimes combined with a delisting tender (which requires the acceptance of ⅔ of shareholders who show up for the tender auction to be effective, and a report stating that the offer is being made at a fair value).

   Some M&As require regulatory approval (either prior to the closing or as a post-closing action), and these include financial institutions, insurance companies, certain telecoms activities, and certain concession holders. Generally, foreign-controlled buyers are not restricted from investing in most industries, subject to a few exceptions (namely, nuclear energy, post office and telegraph services, and the launch and orbital positioning of satellites, vehicles, aircraft and related activities). Brazil does not have a Committee on Foreign Investments (as is the case, for example, with the United States' CFIUS) but the prior consent of the General Office of the National Security Council is required for acquisition of lands along frontier areas (or of equity in a company that holds such lands).

   Since 2011, the pre-merger consent of the Brazilian Competition Authority ("CADE") is required for M&A transactions involving parties that meet certain net revenues criteria (before 2011, approval was made post-merger). CADE has been extremely quick in reviewing fast-tracked transactions (usually 15-30 days, but sometimes less). In more complex transactions, the decision by CADE can take six months or more. CADE has recently issued gun-jumping guidelines stating what is permitted and what is not, pre-approval.

   Overview of M&A activity in 2018

   The number of M&A transactions in Brazil in 2018 has shown a slight decrease from 2017, which may have been mainly a symptom of the uncertainties of the Brazilian political scenario and Presidential election held in 2018. See below the recent year's number of deals (with and without disclosed amounts), the amounts involved and year-to-year variation:

   Source...