Acquisitions can represent an excellent opportunity to expand your business, as they can serve as an alternative to organic growth. In Brazil, acquiring a company can make sense, as it offers a profitable and fast solution to grow your business.

Next, we invite you to explore additional arguments on the advantages of increasing your company’s asset portfolio through the acquisition of a local business, and to understand whether this could be a viable alternative compared to establishing a subsidiary in Brazil.

In this way, since there are many possibilities in an expansion process, we hope to facilitate your assessment of what is best for your company.

What is a Company Acquisition?

A company acquisition – also known as a business acquisition – is the process in which a company buys a portion or all of the shares of another company. As a result, the acquiring company becomes the owner or majority/controlling shareholder, depending on the case.

Before considering the best way to acquire a company, it is essential to understand the challenges of entering the Brazilian market – as this will greatly influence your decision on whether an acquisition is truly your best option or whether, for example, establishing a subsidiary might be a favorable path.

Brazilian Business Environment

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

For example, the Brazilian tax system is one of the most complex in the world. Thus, complying with tax obligations is a challenging task, and the system undergoes constant changes related to a wide range of federal, state, and municipal taxes.

Acquiring an established company means you must ensure it has complied with past tax laws. However, acquiring a well-functioning company is a viable way to do business in Brazil, as it can be a quick way to acquire talent and an established customer base, helping to overcome some of the existing legal and regulatory barriers in this market.

Reasons for Acquiring a Company in Brazil

• Acquiring technologies or patents;
• Reducing market competition;
• Increasing market share;
• Cost savings (under certain circumstances).

Key Sectors for Investment

According to Forbes magazine, in 2020, five sectors were expected to show the strongest growth. They are:

1. Transportation – delivery service, mobility, and shipping;
2. Agribusiness – agrotech, exports/imports;
3. Education – online offerings;
4. Healthcare – pharmaceutical and preventive care;
5. Financial – fintech and payment solutions.

How to Minimize Risks in Company Acquisitions in Brazil

If you are considering acquiring a company in Brazil, it is crucial to minimize all the risks involved in this transaction. For this, some aspects should be taken into consideration, such as:

• The number of similar targets in the segment;
• The prospect of a positive Return-On-Investment (ROI);
• Similarities related to the business profile and culture between the companies involved in the acquisition process;
• The reputation of the target and its owners/C-Levels.

Based on the above aspects, the usual steps involved in the acquisition process are:

• Market study: Before any offer, study the market thoroughly, evaluate all other options, and ensure the target aligns with your business culture;
• NDA signing: A confidentiality agreement is signed, and the process of purchasing the company begins. Confidential data, accounting, and financial information should be shared by the target company;
• Modeling and evaluation: Create a financial model for the company’s valuation with all relevant information in hand;
• Non-binding acquisition offer: Estimate the company’s potential value. This phase includes presenting a “non-binding” offer that will only be confirmed after due diligence;
• Due diligence: Verify the legal, financial, and operational data of the company. The goal is to confirm the data and main risks;
• Binding acquisition offer: At this stage, make the final offer official;
• Signing the purchase and sale agreement: Settle the terms of the agreement.