Gabriela de Ávila Machado
Lawyer at Marcos Martins Advogados
The process of merging and acquiring companies (M&A) has become an economically viable solution for many entrepreneurs who run the risk of reducing their operations, cutting staff or even closing their doors for good.
In practice, it represents the mutual consolidation between different companies to form a single business, or the acquisition of assets from one business by another, providing the emergence of new ventures. Even with the pandemic, this trend has remained strong in the country – even showing a considerable increase compared to previous years.
According to data from consultancy PwC, 802 transactions were recorded between January and October last year, an increase of 13% compared to the same period in 2019. In addition, between July and September 2020 alone, the number of mergers and acquisitions grew by 46% compared to the same period last year.
This trend has been most present in technology, health and real estate companies, for example, which have seen an increase in demand for their services during the pandemic. After all, social isolation has driven digital transformation, the search for services and products in the health sector and for larger residential properties, since the home has also become the office for many people.
In this context, M&A is a good option for companies that are in financial trouble due to the economic crisis, as well as a good opportunity for those who want to expand, either in their area of activity or looking to diversify their portfolio. There has even been flexibility on the part of regulatory agencies in order to preserve companies, jobs and consumer benefits.
A good example was CADE‘s decision on May 28, 2020, which allowed Ambev, BRF, Coca-Cola, Mondelez, Nestlé and Pepsico to collaborate together to create the venture called “Movimento Nós”, aimed at recovering the activity of small retailers with the aim of bringing greater capacity to produce effective results and on the scale necessary to help commercial establishments resume their activities.
Another example was the Mexican Economic Competition Commission ‘s announcement that it would not process collaboration agreements necessary to maintain and increase supply, satisfy demand and avoid shortages that were not carried out with the aim of harming competitors. In this way, the lengthy authorization process will be avoided, optimizing M&A that favors the local economy.
And with the devaluation of the Real against the dollar, low interest rates and the availability of labor, Brazil has become an attractive destination for foreign companies, especially from the United States, Germany and France. Between January and August 2020 alone, PwC recorded 151 international transactions in Brazil. Facilitated by low investment rates in the country, it is much more advantageous and attractive to invest in national companies, either by merging their businesses or buying part of their assets.
The scenario for the improvement of the domestic market through the process of mergers and acquisitions is very positive for 2021 – especially due to the arrival of the vaccine and the possible reduction of the pandemic – with greater security for both domestic and international investors.
To avoid falling into traps, some precautions are essential. Relying on due diligence, for example, is one of the best ways of guaranteeing investment security, whether in a merger or acquisition process. Due diligence makes it possible to analyze a company’s various information and documents, making sure of the risks involved in the target’s activities and that it has no labor, tax or even environmental liabilities that could cause future losses to a potential buyer.
Each company must have a good plan and strategy to organize the merger or acquisition process for its business. Regardless of the method chosen, the objective is always the same: to guarantee the survival of the business and – above all – the maintenance of economic well-being.
Marcos Martins Advogados has a team of professionals who are specialists and trained to offer legal guidance to companies in order to adopt strategic and targeted solutions.
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