The Mergers & Acquisitions Review: Brazil

Overview of M&A activity

Despite the country's modest GDP growth of 1.1 per cent in 2019 (compared to 1.3 per cent in both 2017 and 2018) as reported by Brazilian official research and statistics body IBGE,2 2019 was a record-breaking year in terms of M&A activity in Brazil.

According to PricewaterhouseCoopers (PwC),3 there were 912 transactions announced in 2019, a sharp increase of 39 per cent compared to 658 deals completed in 2018, or up 28 per cent compared to an average of 710 deals per year in the past five years (2015–2019). In terms of value, deals with amounts disclosed totalled US$63.8 billion in 2019, exceeding by US$27 billion the amounts disclosed for 2018 deals (US$36.8 billion).4 Private equity activity, for its part, reached 225 transactions among Brazilian and non-Brazilian investors, a remarkable increase of 67 per cent compared to 135 transactions announced in 2018.5

This significant growth in business can be explained by a combination of factors experienced throughout 2019, including growing optimism after the 2018 presidential and Congress elections with the expected government's liberal agenda and a more pro-business environment, inflation under control, an unprecedented fall in domestic interest rates, credit expansion, the Brazilian currency depreciation and the rekindling of discussions over important constitutional reforms.

The approval of the pension reform in October 2019 was an important milestone for the first year of President Bolsonaro's administration. The reform, which, among other improvements, increases the minimum retirement age and certain contribution rates, is expected to enable Brazil to save approximately 800 billion reais within the next 10 years. By extension, this reform has caused the country's solvency risk to plummet, which helps explain the reduction in domestic interest rates.

As yet another important initiative, the Bolsonaro administration has announced plans for privatising a high number of government-owned companies and divesting assets from government-owned companies and ownership interests in private companies. As per government data,6 privatisations and divestments exceeded 100 billion reais in 2019.

The first quarter of 2020 reflected this optimism and was a busy period for M&A practitioners: according to PwC, 89 transactions were announced in January7 and 79 transactions were announced in February,8 up 68 per cent and 18 per cent, respectively, compared to the same periods of 2019. The impacts of covid-19 could already be felt in M&A activity in March 2020, with a lower volume of announced transactions (54, the same number as in March 2019).9 Because of the draconian effects caused to the economy by the uncertainties associated with the pandemic, the first half of 2020 recorded a 5.5 per cent decrease in the number of deals compared to the same period in 2019.10 M&A activity gradually started to pick up at the end of the second half of 2020.

Introduction

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General introduction to the legal framework for M&A

Brazil is a civil law jurisdiction and has a vast and complex legal framework. However, there is no specific framework for M&A transactions. Accordingly, several statutes and rules generally apply, such as:

  1. the Corporation Law,11 which applies to joint-stock companies, and rules on corporate-related matters;
  2. the Civil Code,12 which applies to a broad range of civil and commercial matters, including contract obligations in general and the formation of companies;
  3. the Capital Markets Law,13 which generally applies to capital markets regulations;
  4. when it comes to Brazilian listed companies, several rulings issued by the Brazilian Securities Commission (CVM) also apply regarding, inter alia, corporate reorganisations, tender offers, disclosure requirements, conflicts of interest and fiduciary duties;
  5. the Competition Law,14 which applies to any concentration acts (merger control); and
  6. specific rules issued by industry regulators with jurisdiction over the sector in which the parties involved in an M&A transaction operate.

i Restrictions on foreign investments and recent updates

Foreign investment is generally very welcomed and encouraged. There are very few restrictions and prohibitions. However, the following, among other activities, are subject to government concession and authorisation:

  1. the acquisition of rural properties or border lands (including by Brazilian companies controlled by foreigners);
  2. the ownership of equity interests in radio and television broadcasting and journalistic companies (capped at 30 per cent); and
  3. mining activities, which must be performed by nationals or, if by foreign players, through companies incorporated in Brazil, and which will also require prior government authorisation if located in border lands.

It is worth pointing out that certain restrictions have recently been relaxed:

  1. on 14 May 2019, the Brazilian Energy Policy Council issued Resolution 9 setting out guidelines to foster competition in Brazil's refining activities and relaxing barriers to enter this market;
  2. on 22 May 2019, the Brazilian Senate approved the conversion of Provisional Measure 863 into law, revoking a long-existing prohibition against foreign investors holding more than 20 per cent of the voting capital of Brazilian airlines; and
  3. on 27 September 2019, Decree 10,029 authorised the Central Bank of Brazil to green-light the acquisition or increased participation of foreign investors in the capital stock of financial institutions based in Brazil, without the need for the President's ratification (as previously required).

ii Governing law

It is perfectly possible to choose a foreign law to govern agreements in cross-border M&A deals. However, investors tend to elect Brazilian law whenever the target company, business or set of assets is located in Brazil, since the enforcement of obligations subject to foreign law in Brazil would require the parties to obtain a court decision abroad and then have it recognised by the Brazilian Superior Court of Justice, which tends to be a time-consuming process.

iii Private law emergency regime

On 12 June 2020, in response to the covid-19 crisis, the government enacted Law 14,010 providing for the emergency and transitional legal framework for private law legal relationships. Two items are worth highlighting from a corporate and M&A perspective:

  1. the statute of limitations and preclusive terms were stayed up to 30 October 2020 to avoid forfeiture of defence rights; and
  2. an authorisation was given for holding general meetings by electronic means, legally enabling all private legal entities, including associations and foundations, to hold their general meetings electronically, even without an express provision to that end in their bylaws.

Strategies to increase transparency and predictability

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Developments in corporate and takeover law and their impact

i The Economic Freedom Act

In addition to the pension system reform mentioned above, the government passed the Economic Freedom Act15 in 2019 to streamline and bring greater legal certainty to the business environment.

Sanctioned by the President on 20 September 2019, the Act reinforces important business-related constitutional principles, such as free enterprise and free exercise of economic activity, with minimal intervention of the state in the economy, changing the role of the state to that of a regulatory agent. In addition, the new legislation introduced a set of business friendly rules, including:

  1. the possibility of one single partner forming a limited liability company;
  2. clarifications on the limitation of liabilities of partners of single-member limited liability companies and of unit holders and fiduciary service providers of investment funds;
  3. freedom of contract between private parties, including to establish objective criteria to interpret the terms and conditions of an agreement, and the allocation of risks between parties, as well as a presumption of bargaining power symmetry; and
  4. more straightforward corporate rules on subscription of shares according to Article 85 of the Corporation Law, as well as objective criteria and deadlines related to the filing of corporate acts with the boards of trade (Article 41 of Law 8,934 of 18 November 1994).

ii Innovations in public offer registration procedures

On 19 February 2019, the CVM issued, on an experimental basis, Ruling 809 to streamline the registration process for public offerings under CVM Instruction 400, by adopting two main measures:

  1. the possibility of a reserved analysis of requests for registration of:
    • a public offering for distribution of shares within an initial public offering (IPO), or a subsequent offering (follow-on), if the issuer is already registered under Category A;16 and
    • a publicly held company, or procedures for updating information on publicly held companies related to such public offerings; and
  2. a waiver of the 16-day black-out period for granting registration of an offer of any kind of securities under CVM Instruction 400.

iii Changes to mandatory publications and disclosures by joint-stock companies

Law 13,818 of 24 April 2019 amended the publication and disclosure requirements set forth in the Corporation Law. Now, closely held companies with less than 20 shareholders and a net equity of up to 10 million reais are exempted from publishing call notices to general shareholders' meetings as well as management documents, including financial statements. In addition, as from 1 January 2022, the corporate publications required by law must be done in summarised form in a printed newspaper (dispensing with publication in the official gazette), provided that the entire content of such documents is available on the respective newspaper's website, with digital certification. By significantly reducing publication and disclosure costs, the joint-stock company format may no longer be affordable to large enterprises only.

Us antitrust enforcement: the year in review

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Foreign involvement in M&A transactions

According to PwC,17 foreign investors were party to 292 transactions in 2019, up 19 per cent compared to the 245 deals announced in 2018. Foreign investors were primarily based in the United States (33 per cent), Japan (7 per cent), France and Germany (5 per cent each).

One of the key elements for foreign investors considering an acquisition in Brazil continues to be the cultural and behavioural differences between Brazil and other countries, or even between the country's different regions. Therefore, a foreign investor should invest time in understanding any such differences to secure a successful transaction. Another aspect deserving special attention is the need to carry out an in-depth due diligence to assess existing and contingent liabilities.

As a negative update, besides the initial slowdown in M&A deals in 2020 prompted by the covid-19 crisis, Boeing announced the termination of its contemplated merger with Embraer in April 2020.

Significant transactions, key trends and hot industries

Information technology, energy and power (including oil and gas), infrastructure, health, financial and education remain hot sectors in the overall Brazilian M&A environment.

Outbound investments by Brazilian-based investors are still an exception, but a few interesting transactions took place in 2019. In May, Natura announced the acquisition of Avon via an all-share merger, forming the fourth biggest beauty group in the world with annual revenues above US$10 billion; in that same month, Banco Bradesco announced the acquisition of BAC Florida Bank for US$500 million, expanding Bradesco's ability to offer investments and other products in the US to its high-net-worth and affluent clients. In October, JHSF Participações, a Brazilian real estate holding company, announced the execution of contracts to open hospitality and gastronomy activities in Manhattan, New York, expanding its FASANO brand. In November, Marfrig acquired an additional stake of 30.73 per cent in National Beef for US$860 million (following an initial acquisition of 51 per cent in April 2018).

However, the opposite move remains the most common scenario. In January, Mamoura Diversified Holdings and Farallon Latin America announced the acquisition of an 85 per cent stake in Concessionária Rota das Bandeiras from Odebrecht Rodovias for US$1.1 billion. In March, Mexican América Móvil announced the acquisition of Nextel Brasil for US$905 million, making its affiliate, Claro, the second-largest mobile operator in Brazil. In April, Lundin Mining announced the acquisition of Mineração Maracá, owner of copper and gold mines in Brazil, for a cash consideration of US$800 million, plus contingent considerations. In June, a consortium between Engie and Caisse de Dêpót et Placement du Québec acquired 90 per cent of Transportadora Associada de Gás, a subsidiary of Petrobras, for US$8.2 billion. In October, Knight Therapeutics acquired control of Biotoscana for 595.6 million reais.

Local deals also played a significant role in 2019. In May, Hapvida, a major healthcare provider, acquired Grupo São Franscisco for US$1.3 billion. One month later, another transaction in the health sector saw Rede D'Or, the biggest healthcare provider in Brazil, acquire Maternidade Perinatal for 800 million reais. Also in June, Cosan concluded a voluntary tender offer by which it acquired 14.77 per cent of Comgás for 1.6 billion reais; and Omega Geração, a Brazilian renewable energy investment company, acquired CEA - Centrais Eólicas Assuruá for approximately US$500 million. In October, Yduqs announced the acquisition of Adtalem Brasil, the 10th-biggest group in private education in the country, for 1.92 billion reais.

Financing of m&a: main sources and developments

Despite the sharp fall in the domestic interest rate (Selic) and increased bank lending activity, including in response to recent government measures to reduce funding via development banks such as the BNDES, the cost of credit remains high in Brazil, with an average interest rate of 23 per cent in 2019.18

Private equity (PE) and venture capital (VC) investments continue to grow in size and importance in Brazil. According to a joint study by KPMG and ABVCAP (Brazilian Association of Private Equity and Venture Capital),19 23 billion reais was invested by PE and VC sources in 2019 (an increase of almost 50 per cent compared to 15.6 billion reais in 2018).

In 2020, an important element with a negative bearing on credit is the covid-19 pandemic. Under high demand from different players, banks are focusing on helping large Brazilian companies and multinationals weather the crisis, as well as on funding working capital rather than acquisitions. Besides, with the general loss of liquidity of assets and given the uncertainties over the crisis fallout on the balance sheet of past borrowers, banks are acting more cautiously.20

On the other hand, amid the pandemic, the Brazilian capital markets have gained traction in the second quarter of 2020, driven by local investors looking for alternatives to the low gains from fixed income investments. For illustrative purposes, five companies launched their IPOs on the Brazilian stock exchange (B3 SA - Brasil, Bolsa, Balcão) in 2019, exceeding 9 billion reais in value; until the end of August 2020, 12 companies had launched their IPOs, exceeding 12 billion reais in value. In terms of follow-ons, 37 deals were conducted by Brazilian listed companies, totalling almost 80 billion reais, while until the end of August 2020, 17 follow-ons were conducted, exceeding 54 billion reais.21

Employment law

New legislation on employment matters was enacted amid the 2020 coronavirus crisis to deal with its effects on the workplace. Companies have had to grapple with the new arrangements made during the pandemic period, especially those relating to collective holidays, early individual holidays, working hour arrangements, furlough, pay cuts and extended job tenure, to name a few. All of these aspects can have an impact on employees' jobs and income, which may in turn prompt potential changes in employment contracts, profit-sharing plans, long-term incentive plans and collective labour agreements.

The future implications of these measures must be carefully considered in an M&A context, especially in light of the effects of economic group and labour succession resulting from M&A transactions.

Articles 10 and 448 of the Consolidated Labour Statutes (CLT) provide that a change in a company's legal nature does not affect the vested rights of its employees, and a change in a company's ownership does not affect its contracts with employees. These statutory provisions bring two major consequences:

  1. an entity receiving assets and employees (in a sale or transfer) is deemed a successor in and to all employment-related obligations; and
  2. a corporate reorganisation of the employer does not trigger severance payments, notice requirements, consultation periods or pre-approval requirements from any labour union or workers' council.

An employer's corporate reorganisation cannot affect existing benefits or current terms and conditions of employment. Compensation in general cannot be reduced, and terms and conditions of employment cannot be changed to the detriment to employees (CLT, Article 468). This is an important element in that the pandemic fallout has triggered major negotiations of collective agreements, multiple lay-offs and the restructuring of wages and benefits.

In addition, the recognition of a labour economic group is inherent to any M&A transaction. Under the law, 'whenever one or more companies, each of them with its own legal identity, are under the direction, control or management of another, or even when they make up an economic group, despite each of them maintaining its autonomy, they must be jointly and severally liable for the obligations arising from an employment relationship'. (CLT, Article 2, Paragraph 2).

The mere fact of sharing the same shareholder does not characterise per se an economic group, but even so the courts have adopted a broader concept to include minority shareholders, investment funds and businesses carried out by two or more companies under contractual arrangements. Courts have held that, in cases like these, there is sufficient coordination towards the same business and effective community of interests to characterise an economic group. In practical terms, the exchange of employees among companies, use of the same facilities, and interference by one company in the management or employment relationships of another are good examples of situations that the labour courts tend to treat as an economic group.

The main effect of being part of an economic group is to become jointly and severally liable for employment matters. By extension, any of the co-responsible parties may be compelled to pay in full an award granted in court in a labour claim, without limitation and regardless of the size of the investment or equity it has made or will have, directly or indirectly, in the direct employer.

Tax law

i Taxation for sellers

As a rule, the main tax implications for the seller in M&A deals is the taxation on potential capital gains. When the seller is an individual resident in Brazil, the capital gain from disposal of shares or other assets is taxed at progressive rates from 15 to 22.5 per cent, as follows:

  1. 15 per cent for gains up to 5 million reais;
  2. 17.5 per cent for gains between 5 million reais and 10 million reais;
  3. 20 per cent for gains between 10 million reais and 30 million reais; and
  4. 22.5 per cent for gains above 30 million reais.

The same rates apply to capital gains earned by a foreign seller, but in this case Brazilian income tax is due only if the underlying asset is located in Brazil. If the foreign seller is resident in a tax haven jurisdiction, income tax on capital gains is increased to a flat 25 per cent rate.

Foreign sellers investing in the Brazilian financial and capital markets currently qualify for a special tax regime, which might exempt potential capital gains from taxation if certain requirements are met.

In turn, capital gains derived by local legal entities on the sale of equity interests are taxed by Brazilian CIT (IRPJ/CSL) at a 34 per cent rate. Earnings are also taxed by social contributions (PIS/COFINS) at a 4.65 per cent rate only if the equity interests are treated as current assets on the balance sheet of the Brazilian legal entity selling the shares.

Deals involving a direct sale of assets or inventory could also trigger other taxes such as a state tax on sales (ICMS) at variable rates depending on the state and on the items sold; federal tax on manufactured products (IPI) at variable rates depending on the items sold; or PIS/COFINS on the revenues arising from the sale.

ii Tax implications for buyers: asset deal versus share deal

In an asset deal, the buyer usually has to allocate the purchase price to each of the assets or rights being acquired, and the corresponding value may be depreciated or amortised for CIT purposes, in accordance with Brazilian tax law.

Generally, the acquirer of a commercial, industrial or professional establishment is jointly liable for the taxes due by the previous owner in connection with the business when the previous owner ceases doing any type of business; otherwise, only vicarious liability applies to the acquirer.

Share deals, on the other hand, usually allow buyers to recognise a premium on a transaction that, in certain circumstances, can be tax-amortised or depreciated by a buyer incorporated in Brazil.

Under Brazilian current tax regulations and in keeping with the International Financial Reporting Standards regulations, Brazilian companies acquiring shares in another Brazilian company must break down the purchase price into the following items:

  1. first, the amount of the net equity of the target company on the date of acquisition;
  2. then, any positive or negative difference between the net fair value of the identifiable assets and liabilities of the target company and the net equity described in item (a); and
  3. finally, goodwill or bargain purchase, which corresponds to the positive or negative difference between the total purchase price and the sum of items (a) and (b) above.

In this context, the tax regulations establish that a purchase price allocation report (PPA) must be prepared by an independent specialised company to support the net fair value of the assets and liabilities of the target company – item (b) above. The residual amount, if any, would correspond to goodwill – item (c) above. Such PPA report must be filed with the Brazilian Internal Revenue Service (RFB) within 13 months from acquisition of the investment. Alternatively, the taxpayer may file a summary of the PPA with any Brazilian notary of deeds and documents, also within the same 13-month period.

In a corporate reorganisation involving a Brazilian buyer and target – such as a merger or spin-off transaction, for instance – the amounts allocated to the surplus value of the assets described in item (b) above, as registered in the accounting books of buyer, should in theory cause the step-up in the tax basis of the underlying assets of the target company.

In this case, a tax shield should arise from the expenses related to depreciation or amortisation of the asset, provided that it may be depreciated or amortised under an accounting perspective. In turn, the goodwill amount, as registered in the accounting books of the buyer, should in theory become amortisable and deductible from the CIT tax base of the company surviving the merger or spin-off over a period of at least five years (at a maximum rate of 1/60 per month).

iii Current tax environment and tax reform

Brazil is experiencing a very peculiar moment in which Congress, the government and society seem to understand and prioritise the necessity of a sweeping tax reform and simplification thereof.

Among the main discussions and current bills of law pending analysis before Congress, the unification of several indirect taxes into a single VAT, the creation of a new tax to be levied on financial transactions (which the government has been trying to call a digital tax) and the potential taxation of dividends probably accompanied by a reduction in the CIT rates might be emphasised.

While the tax reform tends not to be specifically focused on the tax implications for M&A transactions, the impacts on this industry will be inevitable. If, for instance, Brazil reduces its CIT rate and starts taxing dividends (which have not been subject to taxation since 1995), companies will end up having more cash and incentives to spend in M&A deals. Streamlining the humongous amount of indirect taxes in Brazil might also encourage deals with local entities that have long been uninteresting because of their tax complexity.

Therefore, besides the need to rediscuss deal structures for a better allocation of resources in response to the potential change in income tax rates ensuing from the Brazilian tax reform, broader economic effects are also expected to foster and increase the level of M&A deals in the country.

Competition law

In brief, the Competition Law sets forth that a concentration act (merger filing) is subject to mandatory notification to CADE whenever:

  1. at least one of the economic groups involved has registered, in the year preceding the transaction, gross revenues or overall volume of business equal to or above 750 million reais in Brazil; and
  2. cumulatively, at least another of the economic groups involved has registered, in the year preceding the transaction, gross revenues or overall volume of business equal to or above 75 million reais in Brazil.

In 2019,22 442 concentration acts were submitted to CADE, and the authority reviewed 433 merger filings, out of which 360 were analysed under the fast-track procedure and were ruled on within an average of 16 days. The remaining 73 cases were analysed under the full-form procedure and a decision was issued by the authority on within an average of 89 days. Once the deal is cleared, the parties must observe a 15-day waiting period.

CADE has generally shown a positive and reasonable attitude towards the review of merger filings. Landmark and sophisticated cases, such as Natura/Avon and Boeing/Embraer, were approved by CADE without restrictions. In terms of numbers, out of the 433 cases reviewed by the authority in 2019, 406 were approved without the imposition of remedies, 17 were dismissed by CADE, five were withdrawn by the parties involved and five were approved with remedies (Prosegur/Transvip; GlaxoSmithKline/Pfizer; NotreDame Intermédica/Mediplan Assistencial, Hospital Samaritano and Hospital e Maternidade Samaritano; SM Empreendimentos/All Chemistry; and Disney/Twenty-First Century Fox).23

Remedies imposed by CADE include:

  1. behavioural remedies, which were imposed in all five cases, such as restrictions on participating in mergers for a certain period of time, and concentration-related notification obligations, for instance; and
  2. structural remedies, which were imposed in two cases:
    • the joint venture between GlaxoSmithKline and Pfizer, where the parties agreed on divestiture of the Magnesia Bisurada business by Pfizer; and
    • the acquisition of Fox by Disney, where the parties agreed on divestiture of the Fox Sports channel – it being interesting to note that, despite the parties' efforts to sell Fox Sports, no transaction was successfully completed within the deadline established by CADE. As a result, the authority reviewed its decision and, on 6 May 2020, finally approved the merger provided that, among other conditions, Disney maintained Fox Sports' main channel until 1 January 2022, with the same broadcasting standards.24

On 8 July 2019, CADE issued Resolution 24 amending, among others, the regulation setting out objective criteria for the imposition of fines for breach of gun-jumping rules. The new regulation establishes aggravating circumstances to be added to the 60,000 reais base penalty prescribed by law, and a reduction in the total value depending on the timing of a notification. Gun-jumping fines in Brazil remain capped at 60 million reais.

Further, the submission of non-reportable transactions (i.e., transactions that do not trigger a mandatory filing) has been under CADE's radar recently. Since the antitrust authority may lawfully call for the submission of a transaction that does not meet the filing thresholds within one year from the respective consummation date, CADE has been using this power to scrutinise situations in which a series of acquisitions made in a certain business sector may give rise to anticompetitive concerns.

Finally, the following matters discussed by CADE in the first half of 2020 are worth highlighting:

i State-owned companies and economic groups

In February 2020, CADE decided that different state-owned companies controlled by the same state are usually part of different economic groups;25 the same goes for foreign state-owned companies.26 As an exception to this general rule, CADE argues that two state-owned companies are held to belong to the same economic group when there is a certain level of coordination between them (lack of an independent decision-making process, for example).

ii WhatsApp Pay case27

On 15 June 2020, Facebook and Cielo disclosed the launching of WhatsApp Pay in Brazil. Less than 10 days later, both CADE and Brazil's Central Bank, in separate decisions, ordered the collaboration between Facebook and Cielo to be suspended on grounds that WhatsApp Pay could have anticompetitive effects. On 30 June 2020, CADE's General Superintendence revoked the injunction, but continued the antitrust investigation. A few days after CADE's decision, the Central Bank issued a note authorising the parties to carry out tests on WhatsApp Pay. This shows that CADE monitors mergers closely and will swiftly engage in discussions with other authorities over transactions that may have effects on regulated markets.

iii Digital markets

In July 2020, CADE initiated an investigation into past deals involving tech giants, including Google, Apple, Amazon, Facebook, Microsoft, Twitter, Uber, Booking.com and Mercado Livre. The message is clear in the sense that CADE is determined to get a deeper understanding of the competitive effects on digital markets.

Outlook

The macroeconomic scenario is definitely not the one expected in 2019. After IBGE (The Brazilian Institute of Geography and Statistics) reported a 9.7 per cent drop in GDP in the second quarter compared to the first, Brazilian banks revised their estimates and the average projection at the time this chapter was written points to a 5.3 per cent decrease in 2020.28 For its part, inflation is apparently under control.

Were the difficulties caused by the global crisis not enough, Brazil still has its own internal challenges to grapple with. In August, Salim Mattar, Special Secretary for Privatisation, and Paulo Uebel, Special Secretary for Debureaucratisation, two liberal strongholds, stepped down, complaining about the delay in the privatisation and administrative reform programmes, respectively. On top of that, the market also expects the government to be able to pass the long-awaited tax reform. By doing so, the government would signal its commitment to the serious long-term development of the country and, by extension, would enhance the country's credibility with the business community in general.

From an M&A perspective, despite the natural uncertainties arising from the current crisis and the political instability and noise that may delay the approval of long-overdue modernisation reforms (including tax, administrative and political ones), the country's fundamentals remain strong and attractive to investors. Despite the crisis, 2020 has been a busy year for M&A practitioners, and the general sentiment is that M&A activity will continue to grow in Brazil in the coming years. It is likely that a wave of distressed M&A will occur in 2021.

Footnotes

1 Fernando Alves Meira is a partner and João Vitor de Araujo Crepaldi is a senior associate at Pinheiro Neto Advogados. Special thanks to our colleagues Maurício Guidi, Manuela Prata, Vinícius Seixas, Alessandro Giacaglia and Luís Henrique Fernandes for their contributions.

4 ibid.

5 ibid.

11 Corporation Law, Law 6,404 of 15 December 1976.

12 Civil Code, Law 10,406 of 10 January 2002.

13 Capital Markets Law, Law 6,385 of 7 December 1976.

14 Competition Law, Law 12,529 of 30 November 2011.

15 Economic Freedom Act, Law 13,874 of 20 September 2019.

16 Category A is one of the registration categories of issuers with the CVM. Issuers registered in Category A are authorised to trade any securities on regulated markets. Conversely, issuers registered in Category B are authorised to trade on regulated markets securities other than shares, certificates of deposit of shares or other convertible securities.

23 ibid.

25 See Case No. 08700.003594/2019-43.

26 See Cases No. 08700.007229/2016-65 and No. 08700.008382/2012-86.

27 See Case No. 08700.002871/2020-34.

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