The Mergers and Acquisitions (M&A) market can be a great opportunity for a company’s growth or capitalization of its partners, but the negotiation can be challenging if not planned, considering Brazilian scenario.
Experienced investors actively seek weaknesses to justify lower offers. To ensure that your Brazilian company is valued at its true price, highlighting its strengths, it is crucial to anticipate these arguments and refute them.
We highlight the main aspects in Brazil that a buyer/investor analyzes to try to devalue your business:
1. Absence of Contracts: Verbal agreements or poorly drafted contracts with clients, suppliers, and employees are a major problem in Brazil. The lack of legal security in essential relationships is a warning sign for any investor. Reviewing and formalizing these relationships is essential, especially focusing on the clarity of clauses regarding deadlines, termination, and intellectual property.
2. Hidden Liabilities: Undocumented or inadequately provisioned tax, labor, environmental, or litigation issues represent future risks that the buyer will have to assume. This directly impacts the company’s present value. Mapping these liabilities and adopting proactive solutions is essential.
3. Outdated Technology and Innovation: Companies that don’t invest in technology or are lagging behind their competitors require more future investments, decreasing their present value. Investing in technology and processes that guarantee competitiveness and efficiency is key to increasing business value.
4. Excessive Dependence: Does the company depend on a single client, supplier, or key professional? This concentration is a significant risk and an easy target for the buyer to argue for devaluation.
5. Poor Corporate Governance: The absence of clear processes, weak internal controls, and the mixing of personal and company finances, or a confusing corporate structure, generate distrust. This reduces transparency and management solidity, potentially delaying the M&A process or even making it unfeasible.
Preparing your company for a Brazilian M&A negotiation means more than just having good financial results. It is essential to prepare your business against potential devaluation measures, strengthening its internal and legal structure. By anticipating and resolving these points, the company will be evaluated and negotiated for its true potential.
