Last Updated April 16, 2019

Law and Practice

Contributed By Ferrere Abogados

Authors



Ferrere Abogados is the only multi-jurisdictional, purely South American law firm, and has 250 attorneys across Bolivia, Ecuador, Paraguay and Uruguay, offering international-class service and participating in the majority of important deals. The M&A practice group works in collaboration with the firm’s other areas to form a multidisciplinary team offering full-service legal advice. It represents a stellar list of international and local clients from a wide range of sectors, such as retail, energy, infrastructure, insurance, construction, media and information technology, agribusiness, food, pharmaceutical, banking and real estate. Activity includes acting as buyer’s or seller’s counsel in acquisitions, leading applications for concessions, advising on greenfield projects, and developing ex ante a BIT protection strategy for a major investment.

In Uruguay, the typical process for acquiring/selling a business through a purchase and sale of shares or other participations is as follows:

  • execution of a memorandum of understanding or other preliminary document such as a confidentiality agreement;
  • conduct of the due diligence activities;
  • execution of share purchase agreement and other ancillary documents;
  • notification to the Antitrust Commission or specific regulator (if applicable); and
  • closing.

Although this can vary widely in each case, this process can typically take from four months to one year.

In Uruguay, acquirers are mandatorily required to make a tender offer to all the shareholders of a publicly listed company in the following cases:

  • when they acquire (directly or indirectly) a percentage of shares representing more than 50% of the necessary votes to adopt decisions in a shareholders' meeting;
  • when the percentage of votes mentioned above is reached as a consequence of a merger or another form of takeover;
  • when one of the shareholders reaches the percentage of votes mentioned above as a consequence of a capital reduction of the listed company;
  • when one of the shareholders reaches the percentage mentioned above as a consequence of the exercise of a right of conversion, subscription, acquisition of shares or similar of a listed company; or
  • when a shareholder has the right to appoint the majority of the members of the Board.

Cash is most commonly used as consideration in Uruguay. Consideration in shares is occasionally used in multinational deals that have portions in Uruguay.

Conditions are only allowed in voluntary takeover offers; mandatory tender offers cannot be subject to conditions. In voluntary takeover offers, the conditions allowed by the regulations are:

  • approval of bylaw amendments by the shareholders' meeting of the target company;
  • acceptance of the offer by a minimum number of securities of the target;
  • approval of the consideration by the shareholders' meeting of the offering company, when the consideration consists of securities to be issued by such company; and
  • any other condition that is considered lawful according to the Central Bank of Uruguay.

Tender offers are not common in Uruguay, so there are no minimum acceptance conditions that can be considered usual.

It is possible for the parties in a business combination to condition it on the bidder obtaining financing. However, a mandatory tender offer cannot be subject to the condition of the offeror obtaining financing.

The most common deal security measures used in M&A transactions in Uruguay (transactions in privately held companies) are break-up fees and non-solicitation or exclusivity provisions. It is usual to include in the preliminary agreements of the transaction that, for a certain period, neither the target company nor its shareholders will enter into any negotiations with any other party to sell, transfer or exchange any of the interests, stock or any material assets in the target. If the shareholders of the target company breach this provision and end up transferring the shares of the target to a third party, then they will have to pay the break-up fee.

A shareholder who does not own 100% of a company can generally seek representation in the Board of Directors with a certain number of directors, and veto rights over certain decisions.

In Uruguay, it is possible for shareholders to vote by granting a simple proxy to a third person. No specific formalities, such as the notarisation of signatures, are required when the proxy is granted for a specific meeting. Proxies cannot be granted in favour of administrators, directors, comptrollers and other employees of the company.

There are very few publicly traded companies in Uruguay with trading activity, and tender offers are not common in the Uruguayan market. Therefore, statistics are not available on the mechanisms employed to buy shareholders that have not tendered following a successful tender offer.

There are very few publicly traded companies in Uruguay and tender offers are not common in the Uruguayan market.

Ferrere Abogados

Juncal 1392

+598 2900 1000

ferrere@ferrere.com www.ferrere.com
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Authors



Ferrere Abogados is the only multi-jurisdictional, purely South American law firm, and has 250 attorneys across Bolivia, Ecuador, Paraguay and Uruguay, offering international-class service and participating in the majority of important deals. The M&A practice group works in collaboration with the firm’s other areas to form a multidisciplinary team offering full-service legal advice. It represents a stellar list of international and local clients from a wide range of sectors, such as retail, energy, infrastructure, insurance, construction, media and information technology, agribusiness, food, pharmaceutical, banking and real estate. Activity includes acting as buyer’s or seller’s counsel in acquisitions, leading applications for concessions, advising on greenfield projects, and developing ex ante a BIT protection strategy for a major investment.

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