Adriano Chaves (CGM Advogados): “Brazil has certain competitive advantages in times of uncertainty”
CGM Advogados founding partner Adriano Chaves has represented multinationals in their M&A operations in Brazil for over three decades. Here, he outlines the drivers of transactional growth in the country in the years ahead, in addition to the obstacles potential investors face.
Leaders League: In your view, what will be the biggest driver of global M&A activity over the next five years?
Adriano Chaves: Given the major challenges posed by artificial intelligence, geopolitical shifts and high interest rates worldwide, I believe we will see a significant wave of company consolidation. Companies that struggle most in this environment will be driven to sell themselves or divest part of their assets.
Which sectors or industries do you expect to generate the highest volume of transactions in the coming years, and why?
For various reasons, I believe several sectors will show high transaction volume. Energy, agribusiness and education will likely see many consolidation cases. The technology sector has been the leader in number of transactions and will probably continue to be so. Mining, particularly of minerals relevant to the energy transition, should also see high transaction volume. Lastly, the real estate and infrastructure sectors will also have a high volume of M&A activity.
M&A negotiations involving Brazil feature a high volume of tax and labor contingencies, given the complex regulatory environment
Which of the following constitutes the biggest obstacle to dealmaking at the moment: valuation uncertainty, financing conditions, regulatory approval, geopolitical instability, talent retention or integration risks?
Globally, although the US appears to be leading a loosening of antitrust rigidity, regulatory approval has generated growing uncertainty due to various countries’ concerns about non-aligned nations gaining access to strategic assets. In Brazil, financing conditions may be the biggest challenge.
How have foreign investors been evaluating Brazil compared to other Latin American markets for investments and acquisitions?
I have seen continued interest in Brazil from foreign investors. Brazil has certain competitive advantages in times of uncertainty and war, being a net oil exporter, having a large market, and being far from the main regional conflicts. On the other hand, Brazil is a complex country to do business in, and tax and labor contingencies account for a high number of transactions that fail to close, that don’t move forward.
In your experience, what most distinguishes an M&A negotiation in Brazil from similar international deals?
The high volume of tax and labor contingencies, given the complex regulatory environment, stands out in Brazil. This requires longer indemnification periods and more robust guarantee packages than the average seen abroad.