Contributed By Ferrere Abogados
In companies that are not publicly listed, targets are not required to disclose deals in which they are involved.
In publicly listed companies, targets are required to disclose the deal when there is an effective change of control of the target – ie, when the effective acquisition occurs. However, publicly listed companies are generally required to disclose any relevant fact that may have an impact on the price of the securities, on the decision of the investors to negotiate with such securities, or on the development of the activity carried out as a participant in the market. Therefore, if the deal or potential deal meets any of the aforementioned criteria before there is an effective change of control, the target may have to disclose it sooner.
Since there are very few publicly listed companies in Uruguay with trading activity, no statistics are available on this matter.
The scope of due diligence in Uruguay usually depends on the size of the transaction and the particular areas that may be of concern for the acquirer. However, in general, the areas reviewed in due diligence for a negotiated business combination in privately held companies relate to accounting and financial matters, contracts, corporate, data privacy, environmental, insurance, intellectual property, labour and social security, litigation, real estate and other material assets, regulatory and taxes.
Also, it is becoming more common to conduct due diligence regarding compliance with the Foreign Corrupt Practices Act (FCPA).
It is quite common in M&A transactions of privately held companies to agree on certain exclusivity periods for both parties (acquirer and seller), to prevent the parties from negotiating with third parties during such period. Such exclusivity periods are usually agreed on the binding provisions of a memorandum of understanding, letter of intent or similar, which is signed prior to commencing due diligence activities.
As there are very few publicly listed companies in Uruguay, standstills are not common.
It is not common for tender offer terms and conditions to be documented in a definitive agreement. Tender offers have to be submitted for prior approval to the Central Bank of Uruguay with certain required documentation, including a prospectus and documentation and information regarding the offeror. After the tender offer is approved, it has to be published in two newspapers containing certain relevant information. Upon the publication, the shareholders have a term to accept the offer, which is contained in the documents that have been submitted to the Central Bank and are available for the shareholders to review.
If the minority shareholders unanimously resolve to sell their shares to the acquirer that already possesses control of the listed company (when the shareholder directly or indirectly holds a percentage of shares that represents more than 50% of the necessary votes to adopt decisions in a shareholders' meeting), they can agree on the conditions for such sale in a definitive agreement and avoid the tender offer process.