While in other countries operations of Mergers and Acquisitions of companies have a very significant market, totalizing thousands of transactions annually, in Brazil, this practice is still incipient. Despite this, the outlook is positive, as over the past few years it has gained more prominence due to the decentralization of local markets that brought us closer to global trends.
Therefore, deepening knowledge about these processes becomes an urgent issue, both for companies that seek to diversify their performance in the market and for the consultancies that will provide them assistance.
At first, it is essential to understand that mergers and acquisitions, although related, are not the same thing. These are two unique processes, with distinct implementation and objectives.
While Merging is a technique that aims at corporate reorganization through the union of two or more companies, Acquisition concerns the total or partial purchase of a corporation. In the first process, a legal entity is created to combine the best qualities of the businesses involved in the merger, which makes it stronger in the market. In the second, as often prevails the intention to eliminate a competitor, the purchase is strategic: companies with potential are sought, but there is no interest in keeping them active, it is only intended to acquire their resources.
However, despite the differences, mergers and acquisitions processes share a common point: both require a deep analysis to occur.
Shallow evaluations, in these circumstances, may create immeasurable damages. Weighing risks and advantages is necessary, as well as estimating the impacts such movement could inflict in the market, and, mainly, in the organizations’ economy. It is not easy or fast: many of the negotiations take years, for every detail has to be considered.
In merges cases: “Which of the companies shall remain?” There would be modifications in the organization culture? Redefine target audience and brand positioning would be necessary?” And in acquisitons: “Which is the legal situation of the company? “Does it have any debts? Is there something in their reputation that may compromise the transaction’s success?”.
The questions that arise are numerous and cannot be ignored. Precisely outline the guidelines that will rule the new corporate’s structure is indispensable, as well as knowing the state of each business involved, because, otherwise, the scenario becomes absolutely unsafe. And as long as you’re not sure about every least aspect, your signature should never fill a merger or acquisition contract.
And about the contract, this should be examined clause by clause. Any definition that goes unnoticed can become a legal complication in the future; therefore, counting on the experience of qualified professionals is mandatory. “What do the parties want with the contract?” “Is there transparency in the deal?” “The obligations of each one involved are properly defined?” Every single point must be clarified, in order to not create misunderstandings, conflicts or losses.
And when it comes to Brazil, where the law is complex, all the caution should be doubled. Because if dealing with a regular merge or acquisition is not challenging enough, handle a lengthy and abstruse legal system surely makes everything harder.
In the cases of multinational companies that acquire or merge to Brazilian companies, it is crucial to evaluate the specificities imposed by the laws of the country. From tax to labor aspects, the standards are broad and change frequently, directly affecting businesses’ performance. Considering the region where the company is located, whether or not it owns subsidiaries and which taxation regime to which it is submitted is essential in these circumstances.
Finally, buying, selling or merging companies is a huge step, which has its risks. Given the interest, planning is vital. Therefore, it becomes quite interesting to hire a specialized consulting service to take control of the process and ensure that everything will occur in a proper, quiet and efficient way.
Acting in Corporate Law, Stürmer & Wulff’s specialists assist their clients to create an organized governance structure, that is essential for the healthy development of a company, especially during mergers and acquisitions.
Our extensive experience in corporate governance and the multidisciplinary nature of the firm’s attorneys – who also have a background in related fields such as administration and accounting – enable solid advice and support to companies of all sizes and sectors throughout these and other processes. The office’s performance is, in this sense, wide, encompassing the most diverse issues that daily interfere in business, such as their needs, goals and plans.
If there is an interest in knowing better the Brazilian legal aspects regarding the regularization of mergers and acquisitions, do not hesitate to contact us. It will be a great pleasure to share our perspectives with your business.