Antônia Bethonico Guerra Simoni & Marina Eskenazi
Mergers and acquisitions (M&A) have long been used by investors worldwide as a way to expand their activities, whether within their home jurisdiction or abroad. Through M&A, companies accelerate market entry, acquire local expertise, gain access to established clients and distribution channels, and consolidate scale in a shorter timeframe than through organic growth. Brazil, with its vast consumer market and diversified economic sectors, has been a focus of such investments for many years.
Recently, the Brazilian financial portal InfoMoney published an article highlighting the countries that invested the most in Brazil over the past decade. As expected, the United States and the Netherlands maintained their traditional position as leading investors. Two additional findings deserve particular attention. First, France has significantly increased its share, currently ranking as the third-largest foreign investor in Brazil — a position that reflects the strengthening of economic ties between Brazil and Europe. Second, investors are geographically diversified: besides the Americas and Europe, strong positions are held by Asian countries, notably China and Japan, as well as South American neighbors such as Uruguay. This diversity illustrates Brazil’s global relevance as an investment destination and underscores the attractiveness of its business environment across multiple regions.
For foreign companies, particularly European groups, M&A represents a highly strategic route to “do business in Brazil.” Beyond financial opportunity, acquisitions in Brazil come with a number of legal and regulatory aspects that investors should be aware of before engaging in a transaction.
From a corporate law perspective, investors must first choose the most appropriate transaction structure: acquisition of equity interests (shares or quotas) or acquisition of assets. Equity acquisitions allow foreign investors to step directly into the corporate structure of the target, inheriting ongoing contracts and relationships, but also the legal and financial liabilities of the company. Asset acquisitions, by contrast, may reduce exposure to past liabilities, though they often require careful transfer of licenses, permits, employees, and contractual relationships. In both cases, contractual protections such as representations and warranties, indemnities, escrow arrangements, and earn-out mechanisms are widely used to balance risks identified in the due diligence process. M&A is frequently the choice of foreign investors for a number of reasons, among which we can highlight the likely possibility of maintaining the target’s permits, and even the willingness to maintain the culture of the business.
A second fundamental point is the registration of foreign investment with the Central Bank of Brazil. This procedure is mandatory for equity acquisitions (as it is for acquisition of assets) and ensures the formal recognition of the investment, enabling future repatriation of capital and dividends. Without it, investors may face restrictions on transfers of funds abroad. Compliance with foreign exchange regulations, therefore, is not merely a formality but a key condition for the long-term sustainability of the investment.
Although registration with the Brazilian Central Bank (Banco Central do Brasil) ensures the formal right to repatriate capital and dividends, foreign investors must remain attentive to macroeconomic volatility and regulatory shifts in foreign exchange policy. Sudden depreciation of the Brazilian real or administrative restrictions on cross-border remittances may significantly affect expected returns. Accordingly, the adoption of hedging instruments and the structuring of intercompany financing with attention to foreign exchange regulation are advisable risk management strategies.Competition law is another area of attention. The Brazilian antitrust authority (CADE) requires prior notification of transactions that meet certain revenue thresholds. Over the last years, CADE has increased its scrutiny of cross-border deals, sometimes imposing remedies or conditions to preserve competition in relevant markets. Early assessment of whether filing is mandatory — and what arguments will be necessary to demonstrate the absence of anticompetitive effects — is essential to avoid delays in closing.
The choice of dispute resolution forum represents another pivotal decision in cross-border M&A transactions. While Brazilian courts — notably those with specialized business chambers (varas empresariais) — provide a consolidated framework for corporate disputes, arbitration has become the preferred mechanism where foreign investors are involved. Arbitration under the Brazilian Arbitration Act (Law No. 9.307/1996, as amended) offers confidentiality, procedural flexibility, and the possibility of appointing arbitrators with sector-specific expertise. A carefully drafted clause should designate the arbitral institution, applicable rules, seat of arbitration, and language of proceedings, thereby avoiding enforceability issues. Although both litigation and arbitration remain viable, the latter is generally perceived as enhancing neutrality and legal certainty for international parties.Due diligence plays a central role in identifying risks and quantifying their potential impact. It may be decisive to structure the acquisition itself, to the extent that it may identify the need for guarantees, for example. Therefore, despite the fact that the procedure is not mandatory from a legal standpoint, it is highly advisable that the buyer performs complete legal, financial and operational due diligence of the target company. As for the legal due diligence, a broad range of issues should be covered to better safeguard the investor: corporate and contractual history, tax liabilities, labor and employment matters, environmental compliance, and anti-corruption exposure under the Brazilian legislation. This last element is particularly important when the target company interacts with public authorities or has contracts in regulated sectors.
An essential contractual safeguard in Brazilian M&A practice is the indemnification clause, expressly allocating liability for pre-closing contingencies to the sellers. Given that the acquisition of equity interests entails the assumption of both assets and liabilities, it is customary for sellers to remain bound by obligations arising prior to closing, particularly in tax, labor, environmental, and regulatory domains. Well-structured indemnification provisions should establish survival periods, liability caps, de minimis thresholds, and effective guarantees such as escrow accounts or insurance coverage. Such drafting, consistent with international best practice and recognized under Brazilian contract law, mitigates asymmetries of information and preserves transactional balance.Sector-specific restrictions should also be considered. Brazilian law imposes limitations on foreign participation in areas such as rural land ownership, broadcasting, and certain defense-related industries. Other sectors, like energy, health care, and sanitation, require regulatory approvals or special licenses. Awareness of these restrictions at an early stage allows investors to plan the deal structure and timeline more effectively.
In addition to regulatory limitations, Brazilian law also provides mechanisms that facilitate foreign investment through M&A. The principle of freedom of contract, enshrined in the Civil Code, allows parties to design sophisticated contractual arrangements. Corporate legislation, notably the Corporations Law (Law No. 6.404/1976) and the Civil Code rules on limited liability companies, offers flexible structures for mergers, spin-offs, and reorganizations, which are widely used in transactional practice.
The registration of foreign direct investment with the Central Bank of Brazil is conducted electronically through the RDE-IED system, ensuring legal certainty for the repatriation of capital and dividends. Furthermore, the Arbitration Act has consolidated arbitration as a credible and effective dispute resolution mechanism, particularly valued in cross-border transactions. These features – previously detailed – demonstrate that, while Brazil imposes certain restrictions on foreign ownership in sensitive sectors, it also provides a solid legal framework and institutional reliability that support complex international M&A operations.
Beyond domestic legislation, Brazil is also part of a broader international framework that supports cross-border M&A. Since 2015, Brazil has adopted Cooperation and Facilitation Investment Agreements (CFIAs) with several partner countries, focusing on institutional dialogue, regulatory cooperation, and dispute prevention rather than traditional investor-state arbitration. These agreements, although distinct from classical bilateral investment treaties, provide foreign investors with an additional layer of predictability and transparency. Moreover, Brazil’s accession to the 1958 New York Convention ensures the recognition and enforcement of foreign arbitral awards, reinforcing the reliability of arbitration clauses in M&A contracts. Finally, Brazil maintains a network of double taxation treaties (DTTs) with numerous jurisdictions, which mitigates the risk of fiscal inefficiencies and double taxation in cross-border structures, further enhancing the attractiveness of the Brazilian market for international acquirers.
Recent legislative reforms have also reshaped the Brazilian investment landscape, creating new opportunities for cross-border M&A. The Legal Framework for Startups, the New Sanitation Law, and the Modernization of Foreign Exchange Regulations have simplified corporate procedures, enhanced infrastructure investment, and facilitated international financial flows. Combined with a thriving ecosystem of fintechs, healthtechs, and digital platforms, these developments illustrate Brazil’s transition into a more innovation-oriented economy, where foreign investors can participate not only in traditional sectors but also in emerging technology-driven industries.
From a commercial standpoint, acquisitions are often the fastest way for foreign companies to achieve significant presence in Brazil. Whether the objective is to access the country’s 200-million-plus consumer base, integrate into regional supply chains, or leverage Brazil’s strengths in agribusiness, renewable energy, or technology, M&A provides immediate positioning. Nevertheless, value creation depends on post-closing integration: harmonizing governance structures, retaining key management, ensuring cultural alignment, and consolidating compliance standards across jurisdictions are all critical steps for a successful outcome.
A concrete example of this dynamic can be observed in the case of France. The recent rise of French investment in Brazil deserves particular attention not only in terms of scale but also of orientation. French groups have positioned themselves strongly in renewable energy, infrastructure, and technology-based services, aligning with France’s global priorities in sustainability and digital transformation. This qualitative shift demonstrates that Brazil is increasingly perceived not just as a consumer market, but as a partner in ecological transition and innovation. The convergence between French strategic priorities — green energy, ESG compliance, and digital solutions — and Brazil’s domestic demand for infrastructure modernization and technological development opens a new chapter in bilateral economic relations.
Post-acquisition integration extends beyond operational and cultural harmonization; it also requires alignment of the target’s corporate governance and compliance frameworks with international standards. This often entails strengthening internal controls, implementing anti-bribery and anti-corruption measures (in line with Law No. 12.846/2013), and ensuring compliance with data protection rules under the LGPD (Law No. 13.709/2018) and the GDPR for European investors. Incorporating explicit contractual obligations on governance reforms, compliance audits, and ESG commitments into the transaction documents can accelerate integration, enhance transparency, and bolster the long-term legitimacy of the investment.Beyond regulatory registration and currency considerations, taxation emerges as a central factor in shaping the economic viability of cross-border deals in Brazil. The country’s complex tax regime, coupled with its relatively high overall burden, can materially affect both valuation and deal structure. Careful tax planning — including the use of holding companies, treaty jurisdictions, and reorganization mechanisms — is therefore essential to ensure efficiency and to avoid unforeseen liabilities. In practice, tax structuring is not merely ancillary, but a central pillar of transactional design for foreign investors.
In addition to legal and financial structuring, international investors are increasingly attentive to sustainability and governance standards, which have become essential for long-term success. Another dimension increasingly relevant for international investors is environmental, social, and governance (ESG) compliance. Beyond reputational concerns, ESG performance has become a condition for access to financing, global partnerships, and long-term market positioning. For foreign acquirers, integrating ESG commitments into post-closing governance is both a legal safeguard and a competitive advantage, particularly in sectors exposed to environmental regulation or public scrutiny. By embedding ESG obligations into the transaction documents, investors can align Brazilian operations with global sustainability benchmarks and enhance the legitimacy of their presence in the market.
In parallel, the human dimension remains equally decisive. Post-merger integration challenges — such as harmonizing corporate culture, retaining key executives, and aligning management practices — frequently determine whether value is created or eroded. For foreign investors in Brazil, sensitivity to local business culture and proactive engagement with human capital can be as decisive as regulatory compliance. Strategic integration planning, therefore, should be viewed as a complement to legal due diligence and contractual protections.
In this context, European investors are particularly well positioned. Many already operate in Latin America and can leverage cultural proximity, established trade relations, and experience with regulatory frameworks. The recent growth of French investment illustrates that European groups see Brazil not merely as a distant emerging market, but as a strategic hub for regional and global operations.In conclusion, M&A is more than a transactional tool; it is a gateway to doing business in Brazil in a structured, legally sound, and commercially effective manner. Investors who approach the Brazilian market with careful planning, rigorous due diligence, and experienced local counsel are well placed to capture opportunities and build long-term, sustainable value.
As previously highlighted, indemnification clauses, well-calibrated dispute resolution mechanisms, strategies to mitigate currency risk, and governance integration obligations are not ancillary provisions but core safeguards for international investors. By embedding these elements into the contractual architecture, foreign acquirers can reinforce both the resilience and credibility of their ventures, thereby consolidating Brazil’s position as a secure and strategic hub for international investment.