M&A; Financial Market | Structuring Brazilian M&As of Asset Managers, Advisory Firms, and Fintechs: 4 Key Points that Sellers and Buyers Should Include in Preliminary Documentation

The number of M&A transactions in the Brazilian financial market, involving the acquisition of minority and majority stakes in fund managers, investment advisory firms, and fintechs, is expected to increase in 2026.

In these transactions, sellers and buyers must pay close attention to negotiating key terms and conditions from preliminary negotiations to the closing of the transaction.

Based on recent track record, see below 4 key points that sellers and buyers of equity in financial market organizations should consider starting with the preliminary M&A documents:

1. Preliminary Instruments (MOU, LOI, and TS) Are Strategic for Sellers and Buyers: M&As generally begin with summarizing the main terms and conditions of the transaction in preliminary legal instruments signed by the parties. It is common to use Memorandum of Understanding (MOU), Letter of Intent (LOI), or Term Sheet (TS).

Although some sellers and buyers disregard their importance because they are “preliminary,” the careful negotiation of each term and condition stipulated therein, such as valuation method, payment method, (non-exhaustive) indication of the rights and obligations of the parties, (non-exhaustive) indication of terms for a future shareholders’ agreement (partial acquisitions), precedent and closing conditions, non-compete and non-solicitation terms, exclusivity period for closing the transaction, validity of the preliminary instrument, among others, is of high importance to both sides.

Even if the preliminary instrument is “non-binding,” it will serve as guidance for the preparation of the final M&A documents.

2. Define the Sale Price or Valuation Method: M&A processes can begin with a fixed price already defined between seller and buyer, or by the valuation method to be used (e.g., “X” times AUM (assets under management)/EBITDA/net income, or discounted cash flow, among others).

The fundamental point is that sellers and buyers define the price or valuation method to arrive at the sale price in the preliminary agreement. When valuation is involved, the parties must clearly and objectively define in the documentation what they understand by AUM, EBITDA, net income, etc.

3. Payment Method (Call and Put Options): If the seller and buyer negotiate a call option (for the buyer) or a put option (for the seller) for a certain percentage of equity over time, the call and put periods, the valuation, and the payment method must be objectively foreseen.

There are several cases where the terms and conditions for exercising purchase and sale options are drafted subjectively, creating points of friction and litigation between the parties.

4. Management Powers and Shareholder Agreements: For M&A transactions where there is no full acquisition of equity, it is essential that the seller and buyer exhaustively negotiate the management powers of the target company that will remain with the seller (if they are in charge of the business) and which will require approval from the board of directors or shareholders.

Similarly, the parties should exhaustively define the matters within the competence of shareholders/partners that will require an affirmative vote from the buyer or will give them veto rights.

With the volume of M&As expected to grow in 2026, sellers and buyers must pay maximum attention to negotiating sensitive terms, such as those above, in order to reduce the risks of failure in these transactions.