Brazil merger reforms deemed ‘burdensome’

Recent reforms to Brazil's merger control law, which went into effect last month, create a “new and significant regulatory hurdle” to closing deals in the increasingly popular M&A market, according to law firm Jones Day in a client memo.

The timing of merger reviews is one area of frustration, the memo said. The law now sets out a statutory time period of 240 days for reviews, but can run up to a maximum of 330 days at the request of merging parties or regulators. 

The updated notification form contains “extensive requests for documents and data” and is likely to be even more burdensome and time consuming than equivalent EU merger documents, the memo said. The form requires market assessment studies, board and committee minutes plus marketing reports and business plans of the merged entity. 

“One of the issues for private equity is that unlike the US, EU and other major jurisdictions there is no initial waiting period and timetable for transactions that really don’t raise substantive concerns,” said Fiona Schaeffer, antitrust lawyer at Jones Day.
  
“Many private equity transactions fall in that category, they are purely financial deals and ought to be cleared quickly.  But because there is no intermediate waiting period, PE deals need to allow for up to 330 days to clear Brazilian merger control.” she added
 
The prior law’s 20 percent market share threshold has been abolished. Compulsory notification of transactions now take place when one of the merging parties reports revenues in Brazil of at least R$400 million ($212 million; €170 million) while the other party reports revenues of at least R$30 million.

“By adding a threshold of R$30 million, and therefore requiring at least two groups of companies to have turnover in Brazil, the new thresholds require a greater connection to Brazil than under the previous regime”, said the client memo.

The regime also comes with tough punitive measures with fines ranging from R$60,000 to R$60 million and the Administrative Council for Economic Defense may declare deals void.

“Brazil soon may overtake China as the approval most likely to hold up closing. And Brazil’s new notification form also makes it one of the most burdensome filings to prepare,” the memo said.