The Mergers & Acquisitions Review: Brazil

Overview of M&A activity

Despite the fact that the Brazilian economy was adversely impacted by the effects of the covid-19 pandemic, as reflected in a 4.1 per cent decline in the country's GDP, the worst rate since 1996 (as reported by Brazilian official research and statistics body IBGE),2 M&A activity had another record-breaking year.

According to PricewaterhouseCoopers (PwC),3 there were 1,038 transactions announced in 2020, an increase of 14 per cent compared to 912 deals completed in 2019, or up 48 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 (455 out of the 1,038) totalled US$26.4 billion in 2020, dropping by US$37.4 billion the amounts disclosed for 2019 deals (US$63.8 billion).4 Private equity activity, for its part, reached 283 transactions among Brazilian and non-Brazilian investors, a significant increase of 26 per cent compared to 225 transactions announced in 2019.5

This continued growth in M&A activity, despite the challenges brought by the pandemic, can be explained by a combination of factors experienced throughout 2020, including:

  1. the increased level of activity in certain sectors of the economy, such as e-commerce and technology;
  2. a positive outlook for more resilient sectors, like health and agribusiness;
  3. a very strong year for domestic initial public offerings (IPOs) and follow-ons caused by interest rates at historic low levels and a very liquid market; and
  4. a sharp devaluation of the Brazilian currency (with a very positive impact on commodities exporters).

The approval of the sanitation and water treatment regulatory framework in July 2020 was an important milestone for the second year of President Bolsonaro's administration. The framework aims for the universalisation of public basic sanitation services by 31 December 2033. To meet this ambitious goal, the new law expands the access of private actors to the sector and allows privatisation through the disposal of shareholding control of state-owned companies. By extension, investments in the order of 600 billion reais are estimated to be necessary until 2033. There are also important infrastructure projects that are being pursued by the government that tend to foster the investment agenda, including toll roads, transmission lines, airports and ports.

On the other hand, the Bolsonaro administration is still struggling to keep up with the plans for privatising government-owned companies, divesting assets from government-owned companies and ownership interests in private companies. In 2020, only nine federal projects of the Investment Partnership Program were concluded, while the government expected to auction at least 64 projects.6 Other aspects that are negatively affecting the M&A industry are a reduction in foreign investments, political interference and a lack of long overdue reforms (like the administrative, political and tax reforms).

The first quarter of 2021 was a busy period for M&A practitioners: according to PwC, 333 transactions were announced, a sharp increase of 50 per cent as compared to the same period in 2020 (222 transactions announced).7 In the first semester of 2021, M&A transactions in Brazil involved an amount of more than 250 billion reais.8

The overall scenario for the coming year is still uncertain, especially because it will be an election year, with expected increased polarisation and radicalisation from the main political actors. Inflation is also increasing, causing a migration from risk investments to fixed-yield investments. In any case, Brazil continues to offer plenty of opportunities in different sectors and there are multiple attractive assets that are good targets for investors.

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,9 which applies to joint-stock companies and rules on corporate-related matters;
  2. the Civil Code,10 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,11 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,12 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 very welcomed and encouraged. There are very few restrictions and prohibitions. 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 also require prior government authorisation if located in border lands.

It is worth pointing out that the new sanitation regulatory framework does not restrict the investments by a foreign company, directly or indirectly (through a domestic vehicle).

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, as 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, which were generally valid until 30 October 2020.

On 28 July 2020 the government enacted Law 14,030 providing for additional corporate flexibilities on a transitory basis, including the extension of (1) the deadline for holding general meetings; (2) the term of directors, officers and members of supervisory and advisory bodies; (3) deadlines within the CVM; and (4) the registration deadline of corporate acts before the Boards of Trade.

Finally, Law 14,030/2020 amended the Corporation Law to allow Brazilian companies, closely or publicly held, on a permanent basis, to carry out their meetings electronically, through remote participation and voting.

Developments in corporate and takeover law and their impact

i Reduction of thresholds for the exercise of corporate rights

On 22 June 2020, the CVM issued Ruling 627, pursuant to which percentages required for the exercise of certain rights by shareholders in accordance with the Corporation Law were reduced (based on the company's capital stock) benefiting minority shareholders, including:

  1. in-court requirement for the presentation of corporate books;
  2. call a general meeting in case the company's management does not do so upon a reasoned request; and
  3. require members of the management to disclose certain information (e.g., number of shares, stock option, benefits, among others).

ii General Data Protection Law

The Brazilian General Data Protection Law (LGPD, Law 13,709/2018) came into force on 18 September 2020 for most of its provisions, and it establishes a series of principles that must be followed in the processing of personal data. More recently, on 1 August 2021 the administrative sanctions provisions set forth therein finally came into force and will only be applicable to infringements that occur from this date onwards.

Since the LGPD was enacted, in August 2018, Brazilian companies initiated internal processes to comply with the law's provisions. However, the fact is that few companies are fully compliant with the law at the present date and, thus, LGPD became a hot topic in M&A due diligence and representations and warranties discussions.

iii Plural vote

On 26 August 2021, Law 14,195 was enacted and brought important updates to the Brazilian corporate regulations. The main innovation is the introduction of the long-awaited plural vote (similar to the US super voting shares): common shares may now have different classes so as to allow the assignment of a plural vote, which may not exceed 10 votes per common share, as expressly provided in the company's bylaws.

Publicly held companies that already have their shares or securities convertible into shares traded in organised securities markets may not adopt the plural vote (even by means of a corporate restructuring). That is, only closely held or publicly held companies that are not yet listed may adopt this new class of common shares.

The initial term of the plural voting shares will be up to seven years, extendable for any term; in this case, the law requires compliance with the rights of dissenting shareholders. The bylaws may also provide for the end of the term of plural voting conditional on a certain event.

Shares with plural voting will be automatically converted into common shares without plural voting if transferred to third parties (except if the original holder indirectly remains the sole holder of such shares, among other exceptions).

iv Additional amendments to the Brazilian corporate framework

It is also worth highlighting that Law 14,195 and Supplementary Law 182 of 31 August 2021 (which introduced the legal startups framework) have also incorporated important amendments to the Corporation Law, including the following.

Law 14,195

Closely and publicly-held companies may now appoint non-resident officers, provided the appointed officer constitutes a legal representative in Brazil; and publicly held companies shall now comply with the following:

  1. as a general rule, call notices shall be issued 21 days in advance of the general shareholders' meeting;
  2. the approval of transactions with related parties is of exclusive competence of the general shareholders' meeting;
  3. the positions of CEO and chairman of the board of directors may not be occupied by the same individual;13 and
  4. the participation of independent directors is now mandatory, in accordance with the terms to be defined in due course by CVM.

Supplementary Law 182

All companies may appoint a single officer (the previous rule required at least two); and closely held companies with an annual gross revenue of up to 78 million reais will have the right to:

  1. carry out legal publications electronically, as a general rule;
  2. replace the mandatory corporate books by mechanised or electronic records; and
  3. if the company's bylaws are silent in relation to distribution of dividends, the shareholders' meeting may freely resolve the matter.

Foreign involvement in M&A transactions

According to PwC,14 foreign investors were party to 221 transactions in 2020, down 19 per cent compared to the 273 deals announced in 2019. Foreign investors were primarily based in the United States (32 per cent), France and Canada (7 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 or hidden liabilities.

As a positive update, foreign investment in the first quarter of 2021 has increased 29 per cent compared to the same period in 2020 (respectively, 62 and 48 deals), although national investors are still strongly leading the way, with 252 deals in the period (a 51 per cent increase compared to the same period in 2020).15

Significant transactions, key trends and hot industries

Information technology, services, energy and power, health, financial and the pet industry were the hot sectors in the overall Brazilian M&A environment in 2020.

Outbound investments by Brazilian-based investors included the acquisition by Camil Alimentos, one of the leaders in the food sector in Brazil, who acquired the pet food business of the Chilean Empresas Iansa, for 200 million reais. In February 2020, JBS, one of the world's leading food companies, acquired the American Empire Packing for US$238 million. In the same month, the education conglomerate SEB acquired 70 per cent of the global operations of the Canadian Maple Bear. In March, Hypera Pharma acquired a portfolio of 18 medicines from Takeda Pharmaceuticals, for US$830 million. Nubank acquired two American technology companies: Cognitec (July 2020), and, more recently, Juntos Global (August 2021).

Inbound investments continued to represent a significant part of the M&A activity. In February, the Japanese companies, Daio and Marubeni, acquired Santher SA, one of leaders in the personal hygiene sector, for US$520 million. In April, Softbank invested 250 million reais in Petlove, the largest e-commerce business of pet-related products in Brazil and the third player in the sector (which in turn acquired DogHero in October). In July, another investment in the pet segment, TreeCorp invested 100 million reais in Zee.Dog, a fast-growing pet products company. In September, Farallon Capital announced the acquisition of the cement manufacturer, Grupo Elizabeth, for an enterprise value of approximately 1 billion reais. In the same month, another investment by Softbank, together with General Atlantic, invested 580 million reais in a company focused on authentication with facial biometrics, Acesso Digital. In December, the telecom company Oi SA announced the sale of its mobile network to a consortium composed by Telefónica, Telecom Italia and América Móvil for US$3.3 billion.

As reported, local deals played a major role in M&A activity in Brazil in 2020. In February, Carrefour Brasil acquired 30 of its competitor Makro's stores for 1.95 billion reais; more recently, in March 2021, it announced an important acquisition of the Walmart operations in Brazil (Grupo BIG), for 7.5 billion reais. Also in February, Rede D'Or, the biggest healthcare provider in Brazil, acquired Hospital Aliança, located in Salvador, for 800 million reais. In July, another transaction in the health sector saw Hapvida, a major healthcare provider, acquire 85.7 per cent of Grupo São José, a major player in the health sector in the countryside of São Paulo; later in the year, in September, Hapvida also acquired Grupo Promed for 1.5 billion reais, entering the market in Belo Horizonte. In August, the payment company Stone acquired the software company Linx for approximately US$1.2 billion. In October, Arezzo, a company originally focused on shoes, acquired Reserva for 715 million reais, expanding its activities to the apparel and lifestyle business.

Financing of M&A: main sources and developments

From a credit perspective, 2020 was a positive year. In addition to the continued 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 dropped to the lowest level of the series initiated in 2013, 16.8 per cent annually.16

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),17 23.6 billion reais was invested by PE and VC sources in 2020 (an increase of less than 5 per cent compared to 23 billion reais in 2019).

In 2020, an important element with a negative bearing on credit is the covid-19 pandemic. Under high demand from different players, banks focused on helping large Brazilian companies and multinationals weather the crisis, as well as on funding working capital rather than acquisitions. In addition, 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.18 By the end of the year, the volume of bank credit exceeded 500 billion reais, the highest amount since the beginning of the historic series in 1991, mainly as an emergency recourse for companies to fight the crisis.19

On the other hand, amid the pandemic, the Brazilian capital markets continued to be strong throughout 2020, as well as in the first semester of 2021, driven by local investors looking for alternatives to the low gains from fixed income investments. During 2020, 28 companies launched their IPOs on the Brazilian stock exchange (B3 SA – Brasil, Bolsa, Balcão), exceeding 43 billion reais in value, and 25 companies launched follow-ons, exceeding 73 billion reais in value (totalling more than 115 billion reais). By the end of June 2021, 28 companies had launched their IPOs, exceeding 38 billion reais in value, and 16 companies launched follow-ons, exceeding 40 billion reais in value (totalling more than 78 billion reais).20

Employment law

In 2021, companies are still dealing with the effects of the pandemic. Issues related to returning to the workplace and vaccination are in vogue. Employers have a legal duty to provide a safe and healthy working environment and the discussions regarding whether or not vaccination mandates are valid challenge employers, as well as the possibility of dismissing those employees who refuse to be vaccinated.

Also, remote-working arrangements have become increasingly popular, raising issues related to working hours, payment of benefits, and so on. Cross-border remote working has also increased and up to now there is no specific rule under Brazilian visa or labour legislation governing that scenario.

The effects of these issues, as well as the restructuring of companies because of the financial crisis may lead to new employment arrangements and also possible dismissals, which may be considered in an M&A context, especially in light of the effects of economic group and successor liability resulting from M&A transactions.

Under Brazilian law, the buyer of a business (either via a share transaction or an asset deal) becomes fully liable for any labour and employment matters. This happens because, in accordance with the Consolidated Labour Statutes (CLT), the change to the employer structure or to its shareholders cannot affect employees and their terms and conditions (CLT Articles 10 and 448). Based on this legal rule, the entity receiving the assets and employees becomes successor of all past liabilities. In addition, the controlling shareholder becomes the member of an economic group together with its newly bought subsidiary. Members of this group are considered a joint employer and share joint and several liability, meaning that the buyer can be required to pay salaries, benefits, severance and court awards of workers from the acquired company or business, no matter if relating to a period before the transaction closed (CLT Article 2, Sections 2 and 3).

A transaction affecting the employer 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). The good news for employers is that these protections make it unnecessary to be preapproved by – or notify – labour unions or employees' representatives that a transaction affecting the employer or the business is taking place.

The pandemic did not change these rules, but it caused employers to engage in relevant collective bargaining concerning furloughs, reduced work hours, lay-offs and the like. Negotiations around vaccination mandates are underway as companies are moving back to the office (even if partially) throughout the second semester of 2021.

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 generally 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 corporate income tax (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. That 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 the 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, accompanied by a reduction in the CIT rates might be emphasised.

Recently, the Brazilian Lower House approved a bill of law proposing, among other changes, the taxation of dividends at a 15 per cent rate and the corresponding reduction of the CIT rates to roughly 26 per cent (down from the previous 34 per cent). However, it is still pending analysis by the Senate.

While the tax reform is not specifically focused on the tax implications for M&A transactions, the impacts on this industry will be inevitable. If, for instance, following the bill of law under analysis by the Senate, 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 invest 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.

If the tax reform were to be approved in 2021, the changes it would bring to Brazilian tax regimes would only apply from January 2022 onwards.

Competition law

In brief, the Competition Law sets forth that a concentration act (merger filing) is subject to mandatory notification to the Brazilian antitrust authority, the Administrative Council for Economic Defense (CADE) whenever 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, 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 2020,21 471 merger filings were submitted to CADE, and the authority reviewed 454 merger filings, out of which 391 were analysed under the fast-track procedure and were ruled on within an average of 17.5 days (an increase of approximately 10 per cent compared to the average 16 days in 2019). The remaining 63 cases were analysed under the full-form procedure, and the authority issued a decision within an average of 104.1 days (an increase of approximately 17 per cent compared to the average 89 days in 2019). Once the General-Superintendence's Opinion clears the deal, the parties must observe a 15-day waiting period because registered opposing parties and CADE's Tribunal Commissioners can call the case for review by CADE's Tribunal.

CADE has generally shown a positive and reasonable attitude towards the review of merger filings. No transaction was blocked in 2020. Landmark and sophisticated cases, such as Boeing/Embraer, Nike/Centauro and Fiat/Peugeot were approved by CADE. In terms of numbers, 423 cases were approved without the imposition of remedies, CADE dismissed 22, two were withdrawn by the parties involved and seven were approved with remedies.

Remedies imposed by CADE include:

  1. behavioural remedies, such as in the Nike/Centauro, in which CADE established ring-fencing, and non-discrimination provisions; and Brink's/Tecnoguarda, in which CADE established rules prohibiting the acquisition of companies in certain places and the obligation to file transactions taken place in other places; and
  2. structural remedies, such as in the Liquigas case, in which CADE determined the expansion of the fix-it-first remedy and included additional divestment obligations; in the Hypera/Boehringer Ingelheim, Athena/São Bernardo and Supermercados BH/Sales cases, CADE imposed divestment obligations.
  3. CADE issued a publication analysing the case law from 2014 to 2019 of cases that CADE imposed remedies. It also published reports on the digital market and healthcare industries, which are the key sectors of focus by the authority, together with the financial market.22

Finally, the following matters discussed by CADE in the first half of 2021 are worth highlighting.

i Software and banking

In June 2021, CADE approved without remedies the combination of Linx, a software company with Stone, a payment service company. The case was surrounded by an intense dispute of Linx's assets, which received a hostile takeover from Totvs; within the antitrust process, four competitors, including Totvs, opposed the deal. Eventually, CADE cleared the Stone/Linx merger.23 In parallel, two preliminary investigations were initiated in connection with potential unilateral anticompetitive practices in the sector.

ii Oil and gas

Also in June 2021, CADE approved with remedies the acquisition of Petrobras' subsidiary, GNL Gemini GásLocal, by White Martins.24 While not directly part of the deal, CADE determined that Petrobras had to leave the joint venture between White Martins and GNL Gemini GásLocal through which Petrobras was the supplier of natural gas, White Martins transforms the gas into liquid and GásLocal distributes the product. This joint venture was part of an antitrust investigation that involved discrimination and market foreclosure. CADE benefited from the transaction to influence this other agreement.

iii Healthcare

CADE has examined few cases involving the healthcare sector and should be examining more deals involving this industry. In March 2021, CADE approved the acquisition by NotreDame Intermédica of Medisanitas Group, which offers health insurance products and owns hospitals, laboratories and clinics. In the same month, CADE approved a joint venture between Fleury and Sabin – two large laboratories – in the development of a healthtech company.


Economic activity in 2020 and in the first months of 2021 was strong, certainly exceeding expectations in view of the challenges imposed by the pandemic. Notwithstanding this, despite the World Bank's estimated projection of 5.3 per cent growth in Brazil's GDP for 2021,25 the macroeconomic scenario under construction for 2022 has a number of factors of concern.

At first, the current projections for next year show a modest growth of 1.7 per cent.26 Besides, inflation accumulated in the last 12 months reached 10.25 per cent, a record high in the past 5 years;27 also part of a growing trend is the domestic interest rate (Selic), which is currently at a rate of 6.25 per cent and the financial market expects it to reach more than 9 per cent in 2022. On top of that, Brazil will have presidential elections scheduled for October 2022, adding a significant amount of political uncertainty and instability to the overall economic activity. One can expect a very difficult year for the government to pursue its privatisation and legislative reform agendas.

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, the country's fundamentals remain strong and attractive to investors. Despite the crisis, 2021 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.


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 and Alessandro Giacaglia for their contributions.

2 Source:

4 ibid.

5 ibid.

6 Source:

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

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

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

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

13 As per Article 58, item II of Law 14,195, this provision will only be effective 360 days after the publication of the law.

15 ibid.

16 Source:

19 Source:

23 See Case No. 08700.003969/2020-17.

24 See Case No. 08700.005598/2020-08.

26 ibid.

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