A European technology group had spent eighteen months identifying a Brazilian target. The target held a meaningful share of a regional software market. The window to act was narrow – a competing acquirer was conducting its own due diligence. Moving too slowly risked losing the opportunity entirely. Moving too quickly, without properly accounting for Brazil's competition clearance system, risked a deal that could not close.
This matter involved a cross-border share purchase agreement (SPA) for the acquisition of a Brazilian technology company. Brazilian competition legislation requires mandatory pre-closing notification to CADE (Conselho Administrativo de Defesa Econômica – the Administrative Council for Economic Defence) where the transaction meets defined revenue thresholds. Until CADE issues clearance, the parties cannot consummate the deal.
This case study outlines the strategy applied, the milestones encountered, and three transferable lessons for international acquirers pursuing M&A transactions in Brazil.
Client profile and the challenge
The client was a mid-sized European technology group with no prior operating presence in Brazil. Its objective was to acquire a controlling stake in the Brazilian target through a share purchase structure. The target operated across several Brazilian states and generated revenue above the CADE notification threshold on both sides of the transaction.
The core challenge was threefold. First, the parties needed to execute a legally binding SPA while building in appropriate closing conditions tied to CADE clearance. Second, the client required a thorough due diligence exercise across Brazilian corporate, tax, and employment legislation – areas where civil law rules differ substantially from the client's home jurisdiction. Third, the deal timeline was compressed by competitive pressure from a second interested party.
Practitioners in Brazil note that foreign acquirers frequently underestimate CADE's review timelines. The authority operates a mandatory pre-closing system. Jumping to sign-and-close simultaneously – as is common in some European markets – is not permissible where the thresholds are met. Missing this distinction early is a recurring and costly error.
For related considerations on structuring acquisitions in Brazil, the firm's service page on M&A transactions in Brazil provides a fuller overview of the regulatory regime and transactional tools available to cross-border buyers.
Legal strategy and key milestones
The strategy centred on separating the signing phase from the closing phase. The SPA was executed with a clear set of closing conditions. The most critical condition was receipt of unconditional CADE clearance. The representations and warranties given by the target were negotiated carefully. They covered the accuracy of disclosed financial information, the absence of undisclosed material liabilities, and compliance with Brazilian corporate legislation.
Due diligence was structured in two streams running concurrently. The legal stream examined the target's corporate records, its regulatory licences, and outstanding litigation. The financial and tax stream examined potential exposures under Brazilian tax legislation – an area that generates significant contingent liability in Brazilian M&A transactions. Practitioners consistently note that Brazilian tax contingencies, if not properly identified and quantified during due diligence, become the largest post-closing dispute driver.
The CADE filing was submitted within two weeks of signing. The notification package required detailed market share data, descriptions of the parties' activities in Brazil, and a competition analysis of the affected product and geographic markets. The authority's ordinary review period runs up to 240 days, though the majority of non-complex transactions are cleared within a shorter window in the fast-track process.
The milestones proceeded as follows: SPA execution in month one. CADE notification submitted in month one. fast-track eligibility confirmed by CADE in month two. clearance received unconditionally in month three. closing conditions satisfied and transaction consummated in month three.
Complications encountered
Two complications arose during the process. The first concerned a tax contingency identified late in due diligence. The target had an open dispute with Brazilian tax authorities over the classification of certain software licensing revenues. The exposure was material but not yet formalised as an assessed liability.
The parties addressed this through a purchase price adjustment mechanism and an escrow arrangement. A portion of the consideration was held in escrow for a defined period. Release of the escrowed amount was conditioned on resolution of the tax dispute. This structure protected the buyer without breaking the deal.
The second complication arose within the CADE process itself. The authority's case team requested supplementary information on the buyer's global market position. This extended the review by several weeks. Prompt and complete responses to the authority's information requests are essential. Delays in responding can restart certain procedural clocks and extend the overall review period significantly.
Engaging a lawyer in Brazil with direct experience before CADE proved critical at this stage. Responses to the authority require both legal precision and an understanding of how the authority frames its competitive harm analysis. A poorly structured response can invite deeper scrutiny rather than resolving the authority's concerns.
International acquirers conducting comparable US transactions may find useful parallels in the firm's analysis of M&A transaction strategy in the United States, where pre-merger notification requirements create analogous sign-to-close dynamics.
Transferable lessons for cross-border acquirers
Lesson one: Build CADE timing into the deal structure from the outset. International buyers accustomed to deal processes where signing and closing occur simultaneously must recalibrate for Brazil. The SPA must include closing conditions that explicitly address competition clearance. Deal exclusivity arrangements and any break-up fee mechanics should account for a review period of up to several months. Failure to do so creates misaligned expectations between the parties and can generate disputes about whether the buyer is obligated to close before clearance is received.
Lesson two: Treat tax due diligence as the highest-priority workstream. Brazil's tax legislation is detailed and layered. Contingent tax liabilities are a structural feature of many Brazilian businesses, not an anomaly. Buyers who treat tax due diligence as a secondary workstream – or compress it to meet a tight signing timeline – frequently encounter material exposures post-closing. Escrow and price adjustment mechanisms are the standard mitigation tool, but they must be sized correctly based on a thorough pre-signing analysis.
Lesson three: Anticipate information requests from CADE and prepare in advance. The CADE notification package should be assembled in parallel with SPA negotiation, not after signing. Delays in submitting a complete and accurate notification extend the review period and create uncertainty for both parties. Where the transaction has any complexity – overlapping product markets, high combined market shares, or vertical integration – the parties should model the authority's likely concerns and address them proactively in the initial filing.
Buyers seeking to understand the broader corporate law environment in which Brazilian M&A transactions operate will find relevant context in the firm's service overview of corporate law in Brazil.
To discuss how these lessons apply to a specific transaction you are considering in Brazil, reach out to us at info@ferrazwhitmore.com.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. As a law firm in Brazil and across Latin American markets, our team supports cross-border M&A transactions, competition clearance processes, and due diligence workstreams for international acquirers entering the Brazilian market. We combine Portuguese civil law expertise with English common law tradition to deliver integrated transaction support across both legal systems. Our M&A practice includes practitioners with experience advising on share purchase agreements, CADE notification procedures, and post-acquisition integration across civil law markets in Europe and the Americas. For international entrepreneurs, institutional investors, and in-house counsel who need results-oriented support on Brazilian transactions, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.