Merger and acquisition opportunities in the Brazilian market

As Frank Lane (American baseball executive) once said, “If you want to see the sunshine, you must weather the storm.” After years of instability and recession, Brazilian economy finally shows signs of recovery. This is a considerable sign for foreign investors, as the dollar continues to rise, the market is heated, and the country demonstrates to be ready for new investments.

This positive development is apparent in the fact that there was a 31% increase in investments made by US entrepreneurs in stocks and debt securities in Brazil in 2016, which represents the largest growth among the top 30 destinations for this kind of investment, according to the US Department of Treasury.

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“The most common strategic way to take advantage of this business climate is to enter the Brazilian market through mergers and acquisitions, which significantly expedite the go-to-market process,” says Michel de Amorim. Amorim is a CPA and a partner at Drummond Advisors.

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This is an excellent time to invest in the largest economy of Latin America, so it is important to pay attention to some crucial points when planning this trajectory of your company:

  • Merger and acquisition operations will often require corporate restructuring on the company’s arrival in Brazil. It is imperative to check with your legal and tax advisor the options available in Brazilian territory, as this will imply tax and legal rules that vary radically for each model.
  • Having the support of an accounting and legal team with experience in bilateral transactions is essential. The considerations involved in negotiations between different jurisdictions are rich in details, so it is important to have the advice of lawyers who know both Brazilian and American law.
  • Pay attention to the due diligence stage, especially regarding labor contingencies, federal, state, and local taxes, since management and business rules in Brazil operate in a unique way from the ones in the USA. Thus, thoroughly investigating and understanding the information collected about operations, finances, and the tax burden applied to the companies with which one wishes to conduct business can be the difference between failure and success.

Above all, stay alert so that the goals you envisioned with the merger or acquisition are achieved – reducing costs, opening new markets, or increasing sales according to projections. To do so, it is worthwhile to set goals and a very determined period to achieve them. As with every type of strategic decision in your company, the keywords are clarity of goals, access to information and quality guidance.

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