In 2018, M&A activity in Colombia decreased by 8 per cent as compared to 2017.2 However, M&A activity in 2019 is increasing, with factors such as a newly elected President who promotes foreign investment, a new tax reform, Colombia's admission as an OECD member, the stability of macroeconomic figures and a strong rule of law coming into play.3 Compared to the first quarter of FY 2018, the number of transactions in Colombia in the first quarter of FY 2019 grew by 14.58 per cent, although the total aggregate value of the transactions decreased by 28.81 per cent.4 The Cross-Border M&A Index published by Transactional Track Record sets forth the following highlights for Colombia during the first quarter of 2019:

  1. a total of 55 transactions (M&A, private equity, venture capital and asset acquisitions) worth US$972 million;
  2. of these 55 transactions, 40 correspond to M&A and are worth US$387 million. Twenty-two transactions are ongoing and are worth US$326 million, and 18 transactions worth US$60 million have been completed;
  3. of the 55 transactions, a total of nine correspond to asset acquisitions worth US$551 million. Six transactions, worth US$551 million, are ongoing, and three transactions, whose value has not been disclosed, have been completed;
  4. a total of 30 cross-border inbound deals into Colombia worth US$263.08 million; and
  5. a total of seven cross-border outbound deals from Colombia worth US$108.5 million.5

Moreover, some of the factors ensuring the continuing success of M&A activity in Colombia are the following:

  1. the approval of a tax reform that provides clarity to anxious dealmakers;
  2. lower valuations because of strong foreign currency exchange as compared to Colombian pesos, resulting in cheaper targets;
  3. Colombia's adherence to key international treaties;
  4. buyers interested in acquiring distressed assets;
  5. favourable regulatory environment, including a flexible foreign investment regime;
  6. well-established orthodox financial management practices;
  7. low inflation;
  8. strong rule of law;
  9. foreign asset management willing to invest in Colombian infrastructure projects;
  10. the biggest infrastructure programme in Latin America, worth 16 trillion Colombian pesos;
  11. implementation of peace agreements; and
  12. global economic recovery, which is enhancing expectations of growth.


The Colombian Commercial Code is the principal legal framework that sets forth the legal vehicles that are available to foreign investors in Colombia and the rules related to corporate governance of Colombian companies, such as quorums, veto rights, fiduciary duties of members of boards of directors and legal representatives, and general rules applicable to foreign investors aiming to conduct businesses in Colombia. Acquisitions of public companies (public takeovers) have special regulations under Colombian law, and are regulated primarily by, inter alia, Law 964/2005, which is the general statute regulating the Colombian securities market, and Decree 2555/2010, which regulates public takeovers.

Nevertheless, many features of Colombian M&A are familiar to global businesses and are similar to international standards of other jurisdictions, especially to New York law standards and styles. In the past, the common law contractual model has influenced the way acquisition agreements are drafted and negotiated in Colombia. It has become common in the legal market that shareholders' agreements, asset purchase agreements and share purchase agreements in Colombia are drafted in a manner similar to New York law-governed agreements, sharing similar provisions.

In fact, in the past couple of years, local arbitrators and case law have accepted pro-sandbagging provisions under Colombian law and the right of buyers to be indemnified via share purchase agreements due to a breach of sellers' representations and warranties of the sellers and of the target company. Such judicial decisions6 by local arbitrators have clarified that concepts arising out of share purchase agreements, although not expressly regulated under Colombian law, do have a legal reasoning and support under Colombian corporate principles and rules.

Therefore, the increasingly sophisticated M&A market in Colombia is another trend and reason for foreign investors to have confidence in the Colombian market.

Some key provisions that are frequently incorporated into the Colombian agreements that are common to New York-style provisions are as follows:

  1. purchase price adjustments, including working capital adjustments and cash-free, debt-free adjustments, and the use of locked box mechanisms;
  2. non-compete provisions and agreements, which now regularly include non-solicitation clauses for the protection of employees and existing commercial relations and which are legal in Colombia only in the context of an acquisition process in order to protect the buyer and the value of the company; and
  3. escrow agreements (holdback provisions are less common, although they are becoming increasingly more common, depending on the target).

In connection with indemnity provisions, limitations of liability (caps) are typically heavily negotiated and may vary depending on the risk level of the target, although the cap typically ranges between 15 to 20 per cent of the purchase price. Carveouts to the cap are generally accepted for fraud, special indemnities and fundamental representations (such as capitalisation, due authority and organisation, and ownership of shares or quotas). It has become increasingly common to leave Foreign Corrupt Practices Act or anti-bribery carveouts as fundamental representations and uncapped, especially when private equity funds are involved in deals and for infrastructure deals.

The Colombian Arbitration Statute7 sets out provisions for domestic and international arbitration and includes flexible and modern regulations for the benefit of foreign investors. For instance, with respect to dispute resolutions, it is increasingly common that when an international party is involved in a deal and the assets are located in Colombia, the international arbitration has Bogotá as the seat of arbitration. The advantage to this is that an award issued within an international arbitration seated in Bogotá is treated as a national award, and is enforceable without any recognition procedure. By contrast, when an award is issued outside Colombia, recognition is required prior to enforcement. It is also possible to have Bogotá as the venue and for hearings to be held in a neutral place.

In addition to having Bogotá as the seat of arbitration, foreign investors might choose as the rules of arbitration either the rules of the International Chamber of Commerce or the rules of the Bogotá Chamber of Commerce, which allows the choosing of international arbitrators instead of local arbitrators.

In connection with shareholders' agreements under Colombian law, provisions are commonly negotiated for minority rights protections, such as the appointment of members of boards of directors, information rights, veto rights with respect to certain matters, the appointment of executive officers of the company, preemptive rights and tag-along rights. In addition, controlling shareholders often negotiate strongly for drag-along rights and control of the day-to-day management of the company. In the past, the enforceability of tag-along rights and drag-along rights under Colombian law were widely discussed, as this was not clear among arbitrators, judges and legal academia. Nowadays, according to a thesis by the Superintendence of Corporations and the flexibility of the simplified stock corporation form, these rights are increasingly common under Colombian shareholders' agreements.


i Tax reform8

The Colombian tax system underwent a large-scale reform in 2018 as part of efforts to obtain the income required by an unbalanced governmental budget. This tax reform reduces companies' taxation by reducing their income tax rates, progressively eliminating the presumptive income rate and excluding companies from wealth tax. Furthermore, the tax reform includes the following key changes, which are particularly important in the M&A area:9

  1. it includes indirect sales of shares, rights or assets located in Colombia as taxable events as if such shares, rights or assets were sold directly;
  2. it modifies the general rule to determine the fair market value (FMV) of direct sales of assets to include special rules designed to prevent tax avoidance; it also extended said rules to rendered services;
  3. it includes a withholding tax of 7.5 per cent applicable to the dividends payable to national legal persons, transferable to a foreign investor or to a local individual shareholder;
  4. it modifies the tax regime applicable to dividends payable to individuals; and
  5. it creates the Colombian holding regime (CHC) to grant certain tax benefits to companies created with the purpose of investing in other companies.

Withholding tax: dividends

A special 7.5 per cent withholding tax rate applies to dividends distributed as non-taxable income to resident companies (increased from 5 per cent in the original finance law bill). The withholding tax is payable only when an initial distribution is made to a resident company, and is treated as an imputed tax credit on a subsequent distribution to a Colombian resident (individuals) or an investor resident abroad. Dividends paid out of profits that were not taxed at the corporate level are subject to the general income tax rate (33 per cent for taxable year 2019). In this last case, the 7.5 per cent withholding tax also applies after deducting the tax paid at the general rate, resulting in an effective rate of 38.025 per cent for taxable year 2019. These rates also apply to dividends distributed to non-resident individuals and foreign entities, subject to certain exceptions.10

Indirect transfers

The indirect transfer of shares or assets in Colombian entities are taxed in Colombia as if the underlying Colombian asset had been directly transferred. If a seller fails to report the deemed income arising out of an indirect transfer as taxable income or capital gain on the income tax return, the subordinate Colombian company would be jointly and severally liable for such applicable tax, as well as for any associated interest and penalties. The purchaser also would be jointly and severally liable if the purchaser becomes aware that the transaction constitutes abuse for tax purposes. These rules do not apply where:

  1. the underlying Colombian assets are shares that are listed on a stock exchange recognised by a governmental authority, and no more than 20 per cent of the shares are owned by a single beneficial owner; or
  2. where they represent less than 20 per cent of both the book value and the FMV of the total assets held by the foreign entity being transferred.

These measures will certainly discourage indirect transfers of shares. However, if an indirect transfer of shares were to be performed, the following contractual measures shall be taken into account from the M&A perspective as per joint and several liability:

  1. a fundamental representation and warranty, probably on the seller's side, shall be included in the share purchase agreement stating that the transaction does not constitute abuse for tax purposes. Such fundamental representation shall survive as per the applicable statute of limitations and shall not be subject to any limitation of liability included in the share purchase agreement (i.e., cap, basket, de minimis); and
  2. a covenant on the seller's side shall be included in the share purchase agreement stating that the seller will comply with the obligation to report the deemed income arising from the indirect transfer.

Tax incentives

The CHC regime is introduced for resident companies whose main activities are holding securities, investing in foreign or Colombian shares, or administering such investments, and that comply with certain additional requirements. The following rules apply under the CHC regime:

  1. dividends received by a CHC from a non-resident entity are exempt from tax in Colombia;
  2. dividends distributed by a CHC to a non-resident individual or foreign company are considered foreign-source income and therefore not taxed in Colombia (but dividends distributed by a CHC to a resident individual or Colombian entity are taxed at the normal rate, and are subject to the general income tax regime); and
  3. the distribution of premiums for the placement of shares is subject to the same treatment as ordinary dividends: that is, as exempt income when the beneficiary is a CHC, as foreign-source income if distributed by the CHC to a non-resident, or as taxable income if distributed to a Colombian resident.

Private equity funds

The rules for the realisation of income by capital funds have been amended so that in certain cases, and subject to the fulfilment of strict conditions, income from such funds will be deemed to arise or to be realised for income tax purposes when the profits are effectively distributed or paid to the beneficiary.

ii Foreign exchange rules11

The government has been introducing important changes concerning the applicable foreign exchange procedures to increase Colombia's competitiveness in foreign markets, internationalise the domestic economy and increase the investment of Colombians abroad. In response to Decree 117/2017 containing the rules governing foreign investments in Colombia and Colombian investments overseas, the Colombian Central Bank issued secondary legislation. Highlights include the following:

  1. Financial investments and investments in assets abroad made by Colombian investors exceeding US$500,000 do not need to be registered if the investment was paid with cash that does not need to be transacted through Colombian financial intermediaries; however, the rule requiring registration when cash is remitted from Colombia remains in place.
  2. While not directly related to foreign investments in companies, the Central Bank also issued new rules governing in a clear manner the purchase of local, Colombian peso-denominated A/Rs by non-Colombian investors seeking to become creditors of Colombian obligors under commercial transactions. This included rules on the acquisition of A/Rs held by local oil and gas companies subject to the special foreign exchange regime. These new regulations solved the controversy of whether Colombian peso-denominated A/Rs could be converted into foreign-currency assets held by offshore creditors.
  3. Regarding financial derivatives products, during 2018, the Central Bank modified certain restrictions to Colombian and foreign counterparties, eliminating the requirement for Colombian financial entities to enter into credit default swaps with foreign counterparties only whenever there was a related foreign investment operation. However, the Central Bank has maintained the provision mandating that local financial entities may only act as protection buyers and not as protection providers.
  4. Local financial entities may now enter into commodities derivatives with foreign counterparties. Furthermore, the Central Bank has removed the limited list of derivatives products that local counterparties may enter into. Finally, restrictions on the settlement (delivery or non-delivery) have been lifted.

These reforms undoubtedly bring more flexibility to the market and its participants.

iii New private equity regulation

To boost the development of the private equity funds industry in Colombia and attract new investors, the government recently issued Decree 1884 2018, which is aligned with international standards and best practices. The most important developments of the new Decree are as follows:

  1. allowing private equity funds to issue bonds (the issuance of bonds is restricted to private equity funds that grant credits);
  2. allowing private equity to grant credits to individuals and corporations and to buy receivables;
  3. units of private equity funds can be negotiated in the secondary market;
  4. private equity funds and their compartments are able to merge or spin-off, and are able to be assigned to an authorised manager; and
  5. new rules related to corporate governance have been introduced. For instance:
    • principles related to management;
    • the prevalence of the interest of investors in all the decisions to be made by a manager;
    • private equity funds shall have the obligation to prepare a conflict of interest policy; and
    • the investment committee shall meet at least once every three months.


Since 2010, US-based companies have been the most acquisitive in the Colombian market. Internet and technology companies have been the most attractive to foreign investors by deal volume.12 Among the main transactions that took place in 2018, the following rank as the biggest:

  1. Grupo Argos increased its participation in Odinsa from 54.7 to 99.8 per cent for 2,578,139 Colombian pesos;
  2. the acquisition of ExxonMobil's distribution in the region by Terpel for 2.146 million Colombian pesos;
  3. the acquisition from the municipality of Bogotá of its 10.4 per cent shares in Grupo de Energía de Bogotá by AFP and other investors for 1.920 million Colombian pesos;
  4. the acquisition from Spain's Gas Natural Fenosa by public tender offer of a controlling stake in Gas Natural SA ESP, one of the main gas distribution and retail supply companies in Colombia, by Brookfield Asset Management for 1.12 million13 Colombian pesos; and
  5. the purchase of Distribuidora Andina de Combustibles by Inversiones Primax and Primax Holdings for US$231.9 million.14

Furthermore, some of the largest transactions during the first quarter of 2019 included the following:

  1. Empresa de Energía del Pacífico's (EPSA) purchase of the power generation assets, including hydropower plants and wind and solar projects, from Celsia for US$222.61 million;
  2. EPSA's purchase of the electric energy distribution and commercialisation business of Enertolima for US$532.01 million;
  3. Gran Tierra Energy Colombia, Southeast Investment Corporation and Gran Tierra Resources' purchase of Vetra Southeast (Spain) for US$102 million;
  4. Smurfit Kappa's purchase of Smurfit Kappa Cartón de Colombia for US$101.72 million;
  5. Financial and Insurance Glenoaks Investments' purchase of GNB Sudameris for US$60.4 million; and
  6. Tecnoglass's purchase of Vidrio Andino for US$45 million.15


i Infrastructure

The fourth generation (4G) road infrastructure programme in Colombia involves 30 toll roads financed by local and foreign lenders. To date, financial closing has been reached for 14 of such 30 4G toll roads, and the financial closing for eight 4G toll roads is expected to occur this year.16 From 2016 until the first half of 2018, Colombia awarded 17 public–private partnership (PPP) infrastructure projects for an amount of US$8.4 billion. Fifteen out of the 17 projects focused on roads, with investment of US$8.4 billion; the remaining two projects focused on electricity, with investment of US$78 million. Furthermore, the President has established a taskforce within the Ministry of Transportation to facilitate PPPs for roads, and is promoting that more than US$4 billion be invested in Bogota's first subway line as a municipal PPP.17 We expect M&A infrastructure activities to continue to grow in Colombia, primarily for the following reasons:

  1. the sale of the participation interests of some of the concessionaires of the 4G infrastructure projects;
  2. the appetite of international investors (Chinese, Brazilian, Spanish and Canadian investors, among others) in infrastructure projects; and
  3. the government's promotion of foreign investment and the development of the country's infrastructure.

Because of advances on the regulation and the strengthening of institutions for PPP initiatives in the infrastructure industry, Colombia is considered the second most favourable country in the region to develop such businesses. Reassurances provided by Law 1882 of 2018 include an enhancement of transparency in public procurement, and an increase of the possibilities for regional and municipal governments and state-owned companies to engage in PPPs. As regards the adequacy of the Colombian PPP agency's staff, the National Infrastructure Agency received an award for its performance in 2018. Furthermore, the President has promoted transparency mechanisms as a response to the Odebrecht corruption scandals.

However, a challenge remains regarding Colombia's investment and business climate score, which has been affected by bribery and corruption scandals. It is not certain that the measures imposed by Law 1882 of 2018 will be able to restore confidence after this reputational damage.18

ii New decision of the Constitutional Court related to infrastructure

To grant legal certainty to the infrastructure sector and to support the fight against corruption, the Constitutional Court conditioned Article 20 of Law 1882 of 2018 through a recent court ruling.19 Before being conditioned by the Constitutional Court, such article of Law 1882 stated that investors in a PPP shall be compensated for all the costs, expenses, investments and interest if such PPP agreement were to be annulled. This means that such compensation could be paid to investors whose unlawful conduct led to the annulment of a PPP, which ended up not penalising bribery and corruption, and infringing constitutional dispositions such as public morality, good faith and public interest.

In its decision, the Court considered that those who finance such projects (banks, funds, etc.) assume the major part of the capital risk, and therefore restitutions arising from the annulment of a PPP agreement are intended to pay a project's debt. Moreover, no compensation shall be paid to a contractor or its members (for such purpose, the corporate veil may be lifted) if their unlawful conduct led to the annulment of a PPP agreement.

Furthermore, the Court stated that the government shall no longer pay for sanctions arising from the early termination of the applicable credit agreements of a PPP, given that the payment of the penalty clauses or the early termination sanctions agreed on by a contractor and lenders may not be justified against the public interest.

The decision of the Court is key for the development of infrastructure in Colombia, considering that this decision protects lenders and third parties that have invested in infrastructure projects and that have acted in good faith. Such court ruling shall reactivate the financial closings of the 4G toll road concessions given that the lenders will have their resources protected.

iii New infrastructure fund

The country's biggest private equity fund for infrastructure started to operate with more than US$1 million provided by pension fund administrators and the Financiera de Desarrollo Nacional (FDN).20 This fund will co-invest with Caisse de dépôt et placement du Québec21 through a platform whose objective is to make capital investments in infrastructure projects and companies. The primary focus of the fund is to invest in roads. However, the fund also intends to purchase power and to invest in social infrastructure through work in the health and education sector, either through PPPs or privately, as well as in water, sanitation and waste management. In addition, the fund intends to invest mostly in brownfield projects and less in greenfield projects.22

iv Representation and warranties insurance

The increased use of representation and warranties (R&W) insurance in transactions has become a trend that reduces risks for buyers and investors in Colombia. Buyers increasingly are willing to use R&W insurance in acquisition proposals to make their bids more attractive and competitive to sellers. In Colombia, this is still an emerging trend that is being analysed by buyers and sellers, and the insurance policies that are available are also being scrutinised.

The terms of the typical indemnity packages differ substantially between transactions that use or do not use R&W insurance. For example, the indemnity escrow amount and indemnity cap size are typically drastically lower in transactions using R&W insurance as compared to transactions that do not use such insurance. Therefore, from a seller's perspective, R&W insurance may help expedite the sale process and improve sellers' return on their investments. A seller may also attract superior bids, because R&W insurance may offer broader indemnification rights (particularly for a private equity or financial sponsor seller). Thus, by purchasing R&W insurance at a fixed cost, a seller may significantly reduce or eliminate contingent indemnification obligations. This protection is especially important for minority or passive sellers who have minimal knowledge or control over a target company.23

From a buyer's perspective, R&W insurance mitigates the risk of not being able to enforce indemnity provisions where inter-jurisdictional legal processes may complicate matters. R&W insurance policies can also be greatly customised: they can provide protection beyond a limited indemnity cap, extend the duration of indemnification rights or replace indemnification altogether, providing a sole remedy for breaches of representations and warranties.


i Legal security for lenders of PPP projects

See Section V.i in respect of the Constitutional Court's ruling stating that restitutions arising from the annulment of a PPP agreement shall pay a project's debt.

ii Issuance of green, social impact and project bonds

The local issuance of green and social impact bonds in 2017 and 2018 increased financing options, especially for sustainability focused projects. Colombia's social impact bond was issued with the support of the Inter-American Development Bank in May 2018 for US$133.3 million with three-year and five-year maturities.

Since 2016, more than US$500 million-worth of green bonds have been issued in Colombia with the participation of banks, energy companies, multilaterals and local investors. According to the Climate Bonds Initiative, green bond issuance grew a steady 4 per cent year-on-year to US$162 billion in 2018.

Bancolombia SA24 took a performance-based approach to satisfy investors and pivot the construction market towards a more sustainable future, focusing its efforts on green buildings (above other areas that it also finances, such as clean production and agribusiness). The bank provides variable loans for green construction financing from 0.5 to 2 per cent less than conventional market rates by using its own resources alongside the proceeds of the green bonds. The more measurably green a project is, the better the financing rate. Qualified projects must receive a preliminary design certificate from an approved green buildings rating system such as LEED or the International Finance Corporation's EDGE.

The success of these early examples, and the support they have received from multilaterals and other organisations, could encourage their implementation in other countries in the region, opening up alternative forms of financing that could be applied to infrastructure and PPP investments.

As to project bonds, nearly US$2 billion has been issued from Colombia since 2015, mostly related to the 4G toll road programme. The 4G-related US dollar project bond size has been constrained by the fact that the projects under the 4G programme are substantially reliant on local currency revenues through user pay tolls, complemented by the availability of payments and certain revenue top-ups made directly by the National Infrastructure Agency (ANI).

Issuances related to the 4G programme have been able to attract international institutional investors anchored by ANI's payment obligations and on external credit enhancement provided by Colombia's development bank, FDN, in the form of subordinated revolving liquidity facilities.


i Legislation relevant for M&A

The labour legislation relevant for M&A in the Colombian jurisdiction varies depending on whether a transaction is conducted as an asset transfer or as a purchase of shares. When a business is acquired by means of a stock purchase agreement, the transaction will not involve a change of employer. Therefore, employees and their conditions, benefits and entitlements are unaffected.

However, if a deal is structured as an asset deal that involves the transfer of personnel, and if the parties involved in the transaction do not previously assign or terminate their employment agreements, this would be considered to be an employer substitution. Pursuant to Colombian law, this would operate automatically upon the execution of an asset purchase agreement and the transfer of personnel.

The main effects of employer substitution under Colombian law are the following:25

  1. Employment agreements of employees are not modified, suspended or terminated, and all risks, duties and liabilities will be transferred to the buyer.
  2. The buyer must therefore match the salaries and benefits that the employees are already receiving.
  3. If the incoming employees have enjoyed different employment benefits compared with those of the purchaser's existing employees in similar job roles, the purchaser might be forced to match these by offering all employees the most favourable conditions (unless otherwise agreed with all the employees, both old and new).
  4. All employees' seniority must be preserved for all legal purposes.
  5. The pension liabilities of the seller will be transferred to the buyer.
  6. The former and new employers would be considered jointly and severally liable for all labour obligations relating to the employment agreements existing at the time the employer substitution takes place, and the new employer will be responsible for the obligations that come into effect after the substitution occurs. If the new employer assumes payments regarding labour obligations that the old employer was forced to recognise, then the new employer can recover them from the old employer, unless agreed otherwise.

viii TAX LAW

See Section III.i.


i Competition law relevant for M&A

As per the Colombian competition rules,27 M&A are subject to antitrust clearance by the Superintendence of Industry and Commerce (SIC) when the following criteria are met:

  1. objective criteria: total assets or joint operating income of the parties involved in the transaction during the fiscal year prior to the closing date, individually or combined, exceed the annual thresholds established by the SIC. For transactions undertaken in 2019, the threshold is equivalent to approximately US$14.4 million; and
  2. subjective criteria: the parties involved in the transaction are engaged in the same economic activity and therefore establish a horizontal relationship (horizontal mergers); or participate in the same chain of value,28 establishing a vertical relationship (vertical mergers) in one or more markets in Colombia regardless of the legal structure used for such purpose.

However, if the subjective criteria set forth above are met but the combined market share of the parties involved in the transaction is under 20 per cent, the parties can apply for a fast-track (implied) approval by submitting a simplified form (notice) before the SIC. The SIC, however, does not issue any opinion or ruling confirming such approval, and the notice is answered by a letter whereby the SIC acknowledges receipt of such notice, within 10 business days counted from the day of the filing before the SIC. Nevertheless, if the combined market share of the parties is equal to or above 20 per cent, the parties must obtain clearance from the SIC through a full filing from which the SIC has the right to approve, or oppose the proposed transaction, or to impose remedies on the proposed transaction. The time frame for clearance depends on the complexity of the competition issues triggered by a transaction, and usually takes from four to eight months.29

ii Gun jumping

In Colombia, during the past year the SIC has become increasingly active in regulating pre-closing behaviours and transaction structures, and this is a trend we expect to continue. Gun jumping relates to the unlawful coordination between the parties of an M&A deal pre-acquisition or pre-merger.

Specifically, gun jumping may occur during the negotiation or due diligence process, between signing and closing, or before the closing of a transaction when:

  1. the parties take (or participate in) concrete decisions in relation to the other party's business affairs, customer relationships, marketing programmes, pricing, price setting, price-related decisions, suppliers or supply-related decisions, or any other commercial decision;
  2. the parties exchange competitively sensitive information between the parties involved in the transaction, absent additional safeguards;
  3. one party intervenes in another party's business decisions or operational management decisions (e.g., by way of a consent mechanism as part of the share purchase agreement covenants);
  4. one party provides access to another party's IT systems or other support functions; and
  5. there is any other action that could be construed as contributing to one party having control over the activities of the other or others before gaining clearance by the antitrust authority and before the transaction is closed.

To mitigate the risk of gun jumping, it is advisable to take certain measures and implement them until closing, especially in the due diligence and negotiation phases of a transaction.

Such measures include designating specialised teams in each of the parties involved, with such members being the only individuals on each side of the negotiation with access to the other parties' competitively sensitive information. Clean team members should only have access to this information to the extent they do not have influence over the commercial decisions of the company that they represent and pursuant to certain confidentiality protocols.

Parties may also agree on interim operating covenants that do not grant them any decision-making power or control over the other party (including veto powers) but that reflect the purchaser's interest in preserving the value of the investment. Parties should implement these covenants through clean team protocols.

Clean team covenants should avoid situations where either party can:

  1. influence the appointment of the senior management of the other party;
  2. influence the other party's pricing policies;
  3. influence commercial decisions of the other party (e.g., through vetoing of tax filings);
  4. influence the target while entering into, terminating or modifying commercial contracts or agreements; or
  5. access commercially sensitive information of the other party during the period before signing and closing.

The design of the protocols should guarantee that should the transaction not close, the parties will continue to act as independent competitors within the relevant market.


1 Alexandra Montealegre and Stefania Olmos are associates at Baker McKenzie.

6 Arbitrator's award dated 1 September 2011 (Baclin Investments SL, Altra Inversiones Ltda, Mauricio Camargo Mejía and Dario Duran Echeverry as the buyers and claimants v. Jairo Gutierrez Robayo, Jimena Gross Mejía, Carlos Andrés Torres Robayo, Nelson Andrés Beltrán Algarra and Monserrat Gross Mejía as the Sellers and Plaintiffs).

7 Law 1563 of 2012.

8 Special thanks to Carlos Espinoza, group director of the tax team at Baker McKenzie Bogotá, for his contributions to and comments on this section.

9 Doing Business in Colombia: A Guide to the Legal Issues. Published by Baker McKenzie in 2017.

11 Special thank you to Sebastian Boada and Daniel Botero, senior associates in the banking and finance team at Baker McKenzie Bogota DC, for their contributions to this section.

16 'Financiadores de APP tendrán garantizados sus recursos', Portafolio, 17 Mayo 2019, p. 12.

17 The Economist, Intelligence Unit, Inter-American Development Bank, The 2019 Infrascope – Evaluating the environment for public–private partnerships in Latin America an the Caribbean.

18 The Economist, Intelligence Unit, Inter-American Development Bank, The 2019 Infrascope – Evaluating the environment for public–private partnerships in Latin America and the Caribbean.

19 Decision issued by the Constitutional Court on 16 May 2019.

20 FDN is a financial corporation that specialises in infrastructure. Its focus is on project finance and structuring.

21 Caisse de dépôt et placement du Québec is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans.

24 Colombia's largest commercial bank.

25 Global M&A Handbook. Volume 1. Published by Baker McKenzie on 2015.

26 Special thank you to the antitrust team of Baker McKenzie Bogotá: Carolina Pardo, principal partner, Angélica Navarro, senior associate and Mariana Camacho, junior associate for their contributions and analysis to this Competition law section.

27 Law 155/1959, Law 1340/2009 and Decree 2153/1992 (among others).

28 A chain of value is a set of activities performed pursuant to which the product delivered is input for another product.

29 Global Public M&A Guide. 2nd Edition. Published by Baker McKenzie on 2018.