Acquiring companies can be an excellent opportunity for expansion and an alternative to organic growth. In Brazil, company acquisitions often make sense as a quick and profitable solution to expand your business.

Below, you’ll find additional arguments on why it might make sense to increase your asset portfolio by acquiring a local company compared to opening a subsidiary in Brazil.

What is a company acquisition?

A company acquisition occurs when one company purchases all or part of the shares of another. By doing so, it becomes the owner or at least the majority shareholder/controller.

Before considering the best way to acquire a company, it is crucial to understand the challenges of doing business in Brazil.

The Brazilian Business Environment

Understanding the Brazilian business landscape and considering cultural differences is essential to finding the safest way to invest and succeed.

On one hand, Brazil’s tax system is among the most complex in the world. Complying with tax obligations is a challenging task, as the system undergoes constant changes and involves a wide range of federal, state, and municipal taxes.

Acquiring an already established and well-functioning company is a viable way to do business in Brazil and can help overcome some of the cultural, legal, and regulatory barriers present in this market.

Reasons to Acquire Companies in Brazil

• Acquiring technologies or patents;
• Reducing market competition;
• Increasing market share;
• Cost savings.

Key Sectors for Investment

According to Forbes, five sectors were expected to show the strongest growth in 2020:

1. Transportation – delivery services and mobility;
2. Agribusiness – exports;
3. Education – online offerings;
4. Healthcare – pharmaceutical and preventive care;
5. Financial – fintech and payment solutions.

How to Minimize Risks in Acquiring Companies in Brazil

If you are considering acquiring a company in Brazil, minimizing all risks involved in the transaction is essential.

To do so, consider factors such as:

• The number of similar targets in the segment;
• The potential for a positive Return on Investment;
• Business profile similarities between the acquiring and target companies;
• The reputation of the target and its owners/C-level executives.

Steps in the Acquisition Process

• Market research: Evaluate all options and ensure the target aligns with your company culture before making an offer;
• NDA signing: A confidentiality agreement is signed, and confidential financial and operational data are shared;
• Modeling and evaluation: Develop a financial model to assess the company;
• Non-binding acquisition offer: Make an initial offer subject to due diligence;
• Due diligence: Review the target’s legal, financial, and operational data to confirm information and assess risks;
• Binding acquisition offer: Submit the final official offer;
• Purchase and sale agreement signing: Negotiate and finalize the terms.