Corporate M&A 2020

Last Updated April 20, 2020


Law and Practice


DLA Piper Martinez Beltran has four partners in its M&A practice, and 16 additional lawyers. Key practice areas include M&A (both local and international), transfers of assets, joint ventures and strategic alliances, due diligence, corporate reorganisations, leveraged buyouts, privatisations, shareholders’ agreements and business integration processes. Clients benefit from DLA Piper’s leading global M&A practice, which has acted in more M&A transactions than any other law firm in the world. The firm’s experience enables it to execute cross-border global deals seamlessly while supporting clients across all stages of the transaction and offering cost-effective, pragmatic business solutions. The team in Colombia has extensive experience in leading and structuring mergers, spin-offs and acquisitions of all sizes for national and international clients.

According to the 2019 fourth quarter report issued by Transactional Track Record, there was a 19% increase in the number of M&A transactions completed in Colombia in 2019, compared to 2018. There were 216 reported transactions in 2019 with a total value of approximately USD12.6 billion (non-confidential transactions), which represents a 189% increase in the value of deals compared to 2018.

Furthermore, there was an increase in the number of transactions during the last quarter of 2019 as well as a material increase in the value of said transactions, which represents strong evidence of investors’ confidence in the Colombian market. There are several factors that will continue to contribute to the increase in confidence in the future performance of the Colombian economy – eg, tax reliefs for companies; investment in major infrastructure projects, oil and gas exploration as well as in renewable energy; and growth in the construction market and in the agro-industry sector.

In terms of M&A transactions, in the latter part of 2019 there was a material increase in financial and insurance deals as well as in real estate deals.

The healthcare sector is also worth highlighting. Due to deregulation during the latter part of 2019 and substantial legal reforms in terms of financing, the healthcare sector has high potential in terms of M&A transactions and thus has attracted the attention of private equity funds and strategic players in the industry. The technology and internet sectors have also become more attractive and dynamic sectors in Colombia, driven by the increase in the existing markets’ customer base and the fact that the sectors possess a lot talent in the country.

Pharmaceutical, agro-industry and tourism are also sectors worth noting due to their high potential in terms of M&A deals.

The financial, insurance and technology sectors saw the most significant M&A activity in Colombia followed by the health, IT and agro-industry sectors. The energy and pharmaceutical sectors were also active.

The primary techniques/legal means for acquiring a company in Colombia are:

  • the purchase or subscription of shares of the target company;
  • the acquisition of the target company's assets; and
  • merging with the target company.

The main regulators for M&A activity are:

  • the Superintendence of Companies (Superintendencia de Sociedades), the government authority that undertakes the surveillance of companies from a corporate and foreign exchange perspective;
  • the Superintendence of Industry and Commerce (Superintendencia de Industria y Comercio), the government entity that undertakes the surveillance of antitrust matters throughout almost all Colombian industries; and
  • the Superintendence of Finance (Superintendencia Financiera), the government entity that undertakes the surveillance of financial entities and entities performing financial activities and authorises transactions in which financial entities and publicly traded companies are involved.

Depending on the target company’s industry, other regulators may have authority over the transaction.

In general terms, foreign investment is allowed in all economic sectors and capital may be freely transferred to and from Colombia provided it is duly channelled and registered with the Colombian Central Bank, pursuant to the Colombian Foreign Investment Regime.

Notwithstanding the above, foreign investment is restricted in the following economic sectors:

  • national security and defence; and
  • the processing and disposal of toxic, hazardous and/or radioactive waste that has not been produced in Colombia.

Law 1340 of 2009 regulates the definition of business integration, the administrative procedure that must be followed when facing a business integration, and the decisions that may result from the administrative procedure when a business combination has been subject to that procedure (ie, to object to the business combination or to impose conditions on its approval). 

Accordingly, business integrations in which:

  • the parties are involved in the same economic activity; and
  • certain economic thresholds are surpassed (ie, operational revenue or assets) are subject to merger control by the Superintendence of Industry and Commerce.

Depending on the combined market share of the parties in the relevant market, a simple notification or a previous authorisation from the authority will be required.

According to Colombian labour laws, and especially for asset deals, it is important to consider that an "employer’s substitution" takes place whenever:

  • there is a change of employer;
  • the enterprise continues; and
  • the employees remain under the same labour agreement.

The effect of an employer’s substitution is the continuity of existing labour agreements, since these are not extinguished, discontinued or modified. It operates automatically, without any additional obligations on employees or third parties, to the extent that the three elements mentioned above are present (as in cases of asset deals, mergers and spin-offs).

The prohibition of collective dismissals is an issue to watch out for (unless prior authorisation from the Ministry of Labour has been obtained); likewise, the prohibition of the dismissal of employees in special situations, without previous authorisation from the Ministry of Labour. The general statute of limitations in labour matters is three years.

There are no laws or regulations that allow the Colombian government, for national security reasons, to block, restrain, limit, or in any other manner scrutinise acquisitions in Colombia.

The most significant recent legal development in Colombia relating to M&A was the enactment of tax reform in December 2019, which maintained a set of rules which imposes taxes on indirect sales of Colombian assets. This may affect M&A transactions involving the transfer of shares and interests or other rights in foreign entities, which imply the indirect transfer of Colombian assets (eg, shares in Colombian entities).

This regime will not apply if:

  • the shares, interests or other rights in the foreign entity are traded on a stock exchange, provided that not more than 20% of those rights are not held by a single beneficial owner; or
  • the value of Colombian assets is less than 20% of the foreign entity's book and commercial value.   

However, a 2% consumption tax over the transfer of immovable property created in 2018 was eliminated in 2019, which will encourage M&A real estate transactions.

It is worth noting that, on 27 December 2018, the government issued a Decree that financial entities may now invest in innovation and financial technology (fintech) companies, introducing an important change to fintech-related deals which generated high M&A activity in 2019. It is also worth noting that tax incentives were introduced in 2019 for investments regarding non-conventional renewable energy and the agro-industry, therefore said sectors have high potential in terms of M&A transactions in 2020.

Deregulation in the healthcare sector is also worth noting. Pursuant to a Decree issued in October 2019, the acquisition of healthcare providers no longer requires prior authorisation by the Superintendence of Health which will contribute to the potential of the healthcare sector in terms of M&A transactions during 2020.

There were no significant changes to takeover law in 2018 or 2019 and no significant changes are foreseen in the 12 months to come.

It is not customary for a bidder to build a stake in the target company prior to launching an offer, mainly because hostile takeovers are rare in Colombia.

There are no shareholding disclosure thresholds for privately held companies. However, whenever an individual or another company controls a company, either directly or indirectly, the controlling individual or entity must register the situation of control before the Chamber of Commerce of the domicile of the controlled company within 30 days from the commencement of control. Note that "control" refers to the ownership of over 50% of the voting stock of a company or to any other situation in which an individual or entity gains the power to control the decisions of the controlled entity.

Publicly traded companies must disclose to the market any change in their shareholding composition equal to, or greater than, 5%.

Companies may introduce higher, but not lower, reporting standards than those set forth in the law, either by means of a provision in their bylaws or other private agreements.

As to other hurdles to stakebuilding, it is worth mentioning that under applicable securities laws, any person or group of persons that can be considered as one single beneficiary can only become beneficiary of a stake of more than 25% in the voting capital of a listed company by means of a tender offer (oferta pública de adquisición). Also, beneficiaries of listed companies that already hold more than 25% of the company’s voting capital, if they wish to increase their participation by more than 5%, must do so by means of a tender offer.

As mentioned in 2.2 Primary Regulators and 2.5 Labour Law Regulations, above, depending on the industry of the companies involved in an M&A transaction and the level of economic concentration, certain previous governmental authorisations may be required.

Dealings in derivatives are allowed but the market in derivatives in Colombia is still developing. These transactions can only be carried out by financial institutions or through stockbrokers.

There are no specific filing or reporting obligations for derivative dealings under securities disclosure and competition laws. See 2.5 Labour Law Regulations and 4.2 Material Shareholding Disclosure Threshold vis-à-vis merger controls and filings with the Chamber of Commerce, respectively, which would also apply to dealings in derivatives.

There are no rules relating to the disclosure of an acquirer’s purpose in an acquisition of a privately held company. Regarding a publicly traded company, under applicable securities laws, whenever a tender offer is launched, the offeror must make the purpose of their acquisition known as well as their intention regarding the control of the company.

The timing of the disclosure of a deal depends on whether the target company is publicly traded or privately held. With privately held companies, there will be no requirement to disclose a deal and the issue is normally addressed in transaction documents. However, with regard to publicly traded companies, there must be a disclosure of material information which normally takes place upon the execution of the agreement.

Market practice is usually the same as legal requirements. Disclosure by companies according to market practice is normally made once the transaction has been declared according to relevant laws.

Although the scope of due diligence may vary, depending on several factors (eg, if the target is publicly traded or privately held, the industry in which the target company operates, the target company's statutory auditor, and the sophistication of the target company's management), due diligence will normally be carried out in two stages: an initial due diligence process, conceived as a "red-flags report" that corresponds to high level analysis highlighting the most relevant legal issues, and a second due diligence process, with a more detailed report and description of the business, together with a report of the target company’s main issues.

Standstills are not common (mainly due to the fact that hostile takeovers are uncommon in Colombia), but exclusivity obligations are relatively common. Exclusivity obligations are normally granted at an advanced stage of a deal, when the parties have reached a price range and the counterparty is comfortable with finalising the deal.

The information and form in which a tender offer need to be undertaken is regulated in Colombia. There have been cases in which the basic principles of the tender offer are set forth in the definitive agreement, but this will not relieve the parties from complying with legal requirements.

The process for acquiring/selling a business in Colombia takes, on average, from six to twelve months, depending mainly on the companies involved (publicly traded or privately held), the industry (regulated or unregulated) and the merger control requirements (antitrust).

Colombia only has a mandatory offer threshold for publicly traded companies. When purchasing the following percentages, a mandatory public tender must be made to all the company’s shareholders:

  • 25% or more of the outstanding shares with voting rights; and
  • 5% per cent or more of the outstanding shares with voting rights, by a shareholder or group of shareholders beneficially owning 25% or more of the outstanding shares.

Generally, cash is the most common form of consideration used for acquisitions in Colombia. Merger transactions, however, usually imply share issuances as consideration.

While, as a rule, offers for publicly traded companies must be unconditional; takeover offers for privately held companies may be subject to some common conditions, such as:

  • minimum acceptance;
  • no occurrence of a material adverse change;
  • the obtainment of all necessary regulatory and/or third-party approvals (eg, authorisation from the antitrust authority); and
  • compliance with negative covenants during the interim period. 

Regulators in Colombia do not particularly restrict the use of offer conditions for privately held companies.

As stated in 6.2 Mandatory Offer Threshold, the relevant control thresholds of listed companies in Colombia are 25%, or 5% when the offeror holds more than 25% of company stock. Reaching these percentages triggers an obligation to undertake a public tender offer.

The minimum acceptance condition for public tender offers concerning publicly traded companies varies significantly. However, it is usual for the offeror to include an acceptance condition equal to the share percentage that the offeror requires to gain control of the company.

A merger may be conditional on a bidder obtaining financing, provided that the bid is for a privately held company, in which case it is usually regulated in the agreement as a condition of closing the deal.

For tender offers related to publicly traded companies, this is not possible. In fact, prior to tendering the offer, the bidder must deliver a guarantee that ensures full compliance with the tender offer and payment obligations. When the payment is made in cash, the guarantee may be a cash deposit, a bank guarantee or a stand-by letter of credit, an insurance policy, debt securities issued or guaranteed by the state, the assignment to the Colombian Stock Exchange of rights in funds or collective portfolios or an international security deposit in a financial institution that meets certain requirements. When the consideration consists of securities, it must be proven that these are free of encumbrances, that they are available and that their effect on the result of the offer, through their delivery in custody or by any other means, guarantees such availability.

It is becoming a common practice for a bidder to seek compensatory fines or break-up fees, as cost-covering mechanisms, in the form of a liquidated damages provision to ensure an expeditious enforceability process. Force-the-vote, no-shop and non-solicitation provisions supplement these mechanisms, so a bidder will usually demand a considerable value for the cost-covering mechanism to avoid sellers to "trading" on the agreed exclusivity.

The bidder may seek to negotiate a shareholder’s agreement with minority shareholders to regulate certain rights and obligations of the shareholders executing the agreement, especially in relation to the governance of a company and the rules governing transfers of shares.

Shareholders can vote by proxy (a third person or another shareholder) in the shareholders' meeting by simply filing the respective written proxy before the shareholders’ assembly, including the following information: the name of the shareholder, the name of the proxy, the date of the meeting (or meetings) and any additional requirement under the company’s by-laws. Directors, however, cannot act as shareholder proxies.

Colombia’s tender-offer regulations do not include a squeeze-out provision. Therefore, squeeze-outs are rare in Colombia.

Nevertheless, once the company becomes private, it may be registered as a simplified stock corporation, a type of company that allows equivalent mechanisms to the squeeze-out.

Prior to Law 1258/2008, forcing a shareholder out of a company was particularly complicated. However, Law 1258 included certain provisions to enable a buy-out of shareholders. Such mechanisms, however, are exclusive for simplified stock corporations and essentially consist of:

  • exclusion; and
  • cash payment in a merger or spin-off transaction.

Through exclusion, a majority of shareholders can vote a shareholder out of a company (the causes for exclusion and its procedures are expressly stated in the by-laws). Following the exclusion, the company shall buy out the excluded shareholder’s holdings.

The other mechanism that may be explored allows a majority of shareholders to approve a merger or a spin off, and to exclude minority shareholders from participating in the resulting entity. Instead of receiving stock, the company can distribute cash to the minority shareholders as payment, thus achieving thus the buy-out. These two alternatives are available only for simplified stock corporations.

Additionally, Law 1258/2008 instituted a short-form merger applicable to companies owning 90% of the shares of a simplified stock corporation. Here, the decision of legal representatives or the Board are enough to approve a merger and a shareholder vote is not needed. The merger can be structured to provide for a cash payment for certain minority shareholders, as explained above, and therefore achieve the buy-out.

Although it is permitted to execute preliminary agreements (pre acuerdos) with the principal shareholders of the target company in public bids, they must be submitted to the Finance Superintendence and to the Colombian Stock Exchange along with the rest of the documentation required to authorise the public tender offer. In addition:

  • the preliminary agreement cannot include any provision contrary to the law;
  • the price of the offer cannot be lower than that under the preliminary agreement;
  • a particular reference to its existence must be made in the offer notice; and
  • must be included in the offer booklet.

Yet in private bids it is possible to execute preliminary or syndication agreements with the principal shareholders of the target company. There is no special provision under which these agreements must be disclosed to the rest of the shareholders, although disclosure is permitted. This type of transaction, in both public and private offers, usually takes place at the beginning of the process and before formal negotiations have been initiated. Although the documents pertaining to such bids are non-binding, the clauses in which they are regulated tend to be binding (or at least for a fixed period).

Finally, although these commitments may provide a way out for the principal if a better offer is made, it is more common for them to include a no-trade provision during a fixed term.

Disclosure will depend on whether the target company is a privately held company or a publicly traded one. In the first case (privately held companies), public disclosure generally occurs at closing or, in some cases, after signing.

In contrast, with a publicly traded company, once the parties have executed the binding transaction agreements, the company must disclose the situation to the market according to the law. The latter is completed through the relevant information report the company must submit to the Superintendence of Finance.

Transactions regarding publicly traded companies, where the threshold is exceeded and a mandatory public tender offer must be made, need to be previously disclosed to the Colombian Stock Exchange and the Superintendence of Finance.

All publicly traded companies must disclose any kind of share issue. Article of Decree 2555/2010 provides that disclosure must be true, correct, clear, sufficient, opportune and reasonable. Regarding issuances, companies must file a "relevant information" report to the Superintendence of Finance, disclosing the relevant amount, number of shares, payment terms and any other relevant conditions of which an expert investor would be reasonably expected to be aware.

According to Article of Decree 2555/2010, a bidder under a tender offer must prepare a booklet including its audited financial statements. In case a bidder is controlled or part of a business group, the rest of the participants' financial statements must be submitted.

In Colombia, financial statements must be prepared in accordance with International Financial Reporting Standards (IFRS).

There is no legal requirement in Colombia to disclose transaction documents in full. Even publicly traded companies shall only disclose relevant information to the extent provided according to the law, particularly pursuant to the relevant information report that must be submitted to the Superintendence of Finance.

Pursuant to Colombian law, directors of a company must act in good faith, with loyalty and with the diligence of a "good businessman". Their actions must be carried out in the company's best interest and considering the shareholders’ interests. Courts have thus interpreted that directors have three primary duties: care, loyalty and good faith. In general terms, a director’s duties are owed to the company. Nonetheless, directors may also be found liable before third parties due to the breach of their fiduciary duties.

Every duty shall be abided by in a business combination. The duty of loyalty, however, has particular relevance in business mergers since it manifests the statutory protection against conflicts of interest and competing activities.

It is uncommon to establish special committees for business mergers to avoid or prevent a conflict of interest. In any case, directors with a conflict must refrain from voting on a specific matter without express authorisation at the shareholders’ general meeting, otherwise they could be found liable for a breach of their duty of loyalty.

In Colombia, only shareholders can waive a conflict of interest or authorise or ratify a transaction involving a conflict of interest. 

Nevertheless, there are initiatives under way to include a measure in the Colombian legal system under which directors will not be responsible for damages arising from a decision made in good faith, based on a recommendation made by a committee of recognised technical suitability and independence, chosen by the Board of Directors or at the shareholders’ meeting. This is without prejudice to the responsibility that may be placed on the committee members. This mechanism would not apply if there were a conflict of interest.

Although, in recent years, there have been proposals to include business judgment rules as express statutory law, for the moment the business judgment rule continues to apply by way of Article 23 of Law 222/1995 and Article 200 of the Commercial Code.

The Superintendence of Companies, in recent rulings, has upheld the existence of the business judgment rule and granted deference to directors and offices. Courts shall apply this rule and assume that directors act with a fiduciary duty to protect the company and, unless it can be proven otherwise, the benefit of the doubt is given to the board members. This reasoning is therefore applied in takeover situations.

A company commonly retains investment bankers, legal advisers and business consultants during a business combination.

Since 2012, there have been specialised court rulings in Colombia on a wide range of corporate matters, particularly breaches of directors’ duties, including conflicts of interest. The duty of loyalty and its scope regarding conflicts of interest have been specified by the decision-making practice of the Commercial Procedures Office of the Superintendence of Companies (Delegatura de Procedimientos Mercantiles of the Superintendencia de Sociedades) on various occasions.

Hostile acquisitions are not common in Colombia, as there are usually controlling shareholders in both privately held and publicly traded companies.

Colombia’s tender offer regulations include a duty of neutrality and passivity similar to the one set forth by the EU Takeover Directive. Directors of Colombian listed companies do not hold the right to block a takeover transaction, and as a general rule do not play any active role in a given transaction. Therefore, hostile transactions are not generally applicable in Colombia. In fact, directors must refrain from performing activities that have not been previously approved by the general shareholders’ assembly and owe a duty of passivity in the event of a hostile bid.

Directors are under a statutory duty of passivity and neutrality during a tender. Additionally, once the offer is publicly tendered, the stock negotiation must be suspended. Therefore, defensive measures taken by directors are almost non-existent. The best, and probably only, measure used in public markets is a competing offer.

As described in 9.3 Common Defensive Measures, directors must refrain from performing activities that have not been previously approved by the general shareholders’ meeting.

Directors cannot take action to prevent a business merger, considering the duty of neutrality and passivity set forth in Colombian tender offer regulations.

Although, some years ago, M&A litigation was rare, it is now rapidly increasing in quantity and complexity. Claims are normally brought before arbitration panels, since M&A agreements usually include arbitration clauses. Claims are normally solved before a judgment has been reached, and it is common that the conflict (if found) is settled directly by the parties.

It is common for share purchase agreements in cross-border deals to be governed by foreign laws (usually English or New York State law) or to agree that any dispute be submitted to international arbitration. Colombia is a party to the New York Convention 1958 and has enacted a UNCITRAL-based law for international arbitration.

Most claims are brought at a post-closing stage.

Colombia has a very concentrated market and thus controlling shareholders are extremely common in both public and closed corporations. Such property concentration is a disincentive to shareholder activity and even if there are certain exceptions, minority shareholders are generally passive investors.

Activists do not seek to encourage companies to enter into M&A transactions. Generally, the controlling shareholder is the one seeking M&A opportunities.

Minority shareholders may have effective means of ensuring consideration for minority interests and enhancing oversight over controlling shareholders or the management. In these instances, it is common to deal with the opportunistic behaviour of minority shareholders seeking liquidity opportunities.

DLA Piper Martinez Beltran

Carrera 7 No 71-21
Tower B. Of. 602
Bogotá, Colombia

+57 317 4720
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Trends and Developments


Baker McKenzie S.A.S. is one of Latin America's award-winning law firms with one of the widest geographical coverages of the region. The firm is multidisciplinary and the firm's professionals are specialists in clients' industries. Technically and commercially top-skilled. the team is trained to anticipate risks in a permanently changing and globalised business environment. The firm's global network allows best-practices and knowledge exchange with some of the most influential business centres in the world. The firm's innovation centres represent a strategic investment to remain at the forefront of legal developments.

M&A Trends in Colombia

Generally, M&A transactions experienced a slowdown during 2019. Some experts attribute this situation to higher interest rates in the United States and to a greater competition for capital flows, which has made portfolio managers more selective in choosing their investments. Considering that investors are expected to proceed more cautiously in the immediate term, especially amid the challenges derived from COVID-19, countries (and particularly emerging markets) should make additional efforts to attract foreign funds, by implementing appropriate regulations and best practices. Particularly in the case of Latin American countries, this might be a challenging task taking into account the prolonged political and economic instability in a number of the region’s member countries and the possible reallocation of funds to face the current sanitary crisis.


In view of the conservative outlook for the Latin American region, some member countries are doubling efforts to improve their competitiveness in order to remain an attractive place to invest. Colombia, for example, in the context of its recent accession to the OECD, has taken important measures to boost investor confidence by observing key standards on corporate governance, investment, competition, capital markets and public administration. In fact, Colombia has been sustainably improving its overall and specific competitiveness scores during the last few years, to the point that it is now the third largest recipient of foreign direct investment in the Latin American region, after Mexico and Brazil.

Furthermore, Colombia is adopting firm policies to diversify its economy and reduce its high dependency on the export of commodities. Particularly, President Duque is aiming to promote sectors that have substantial potential and room for improvement, such as agriculture, construction, energy, services and tourism. These initiatives are laying the foundations to explore new business opportunities beyond the extractive activities and to increase the country’s productivity. Consequently, M&A opportunities are likely to come along with Colombia’s market diversification.

At the same time, there are still big challenges when it comes to corruption, infrastructure, the shift to cleaner energies and the lack of regulations for new technologies arriving in the country. The Colombian government, however, has addressed the complexity and importance of these challenges.

Corruption and Infrastructure

Indeed, Colombia has taken steps to reduce corruption during the last few years, by creating the National Directorate for Prosecution against Corruption, enacting the General Integrity Code and the Transparency and Access to Public Information Law, and by strengthening the legislation to fight foreign bribery.

With respect to infrastructure, Colombia has made considerable progress in the enlargement of its air and maritime port capacity, and have managed to put back on track its ambitious road infrastructure program, having faced delays and difficulties in the past. To be precise, 22 of the 29 4G toll road projects have successfully achieved financial closing, which will greatly improve the country’s connectivity and logistics efficiency as 80% of the country’s freight is transported via road. The high costs associated with the transport of goods due to the country’s relatively precarious infrastructure has, traditionally, been a barrier for foreign investors to enter the Colombian market. Therefore, it is expected that the financial closing of these major infrastructure projects will increase Colombian competitiveness and, thus, facilitate in an increase of the foreign investment in Colombia.

Despite the current sanitary crisis and its forseeable economic effects, President Duque has publicly declared that funds required to finance the country's major infrastructure projects, such as Bogota's subway, the Bogota commuter train and the 4G toll road projects, will not he reallocated to cope with the current funding needs, which shows the government's commitment to the infrastructure and construction industries.

Renewable Energy

On another note, Colombia is getting up to speed with the inclusion of renewable energies in its power supply mix. The country is aiming to reach at least 1500 MW of clean energies by the end of 2022 (Colombia currently has 50MW of installed alternative generation sources). With that in mind, Law 1715 was approved by Congress in 2014, with the purpose of regulating the integration of non–conventional energy sources to the national energy system and to create incentives for investment in this sector. Among other incentives, the law includes deductions on income tax for five years, exemption on value-added tax for equipment destined for investment in the sector and exemptions on customs. These tax incentives are expected to attract substantial foreign investment in clean energies, while the diversification of the power supply mix will significantly reduce the risk of power cuts, positively affecting industry productivity.

Unfortunately, according to the International Energy Agency, the current economic situation will significantly reduce investment in clean energies, especially in solar energy projects. In fact, Bloomberg has forecast that, for the first time since 1980, there will be a contraction of solar energy facilities. This landscape will most likely suppose a slow-down for Colombia's shift to cleaner energies.

Introducing New Technologies

Colombia is currently facing a volatile landscape with respect to the introduction of new technologies, particularly regarding technology apps. The lack of regulation for public transport applications such as Uber, DiDi and Green, among others, is definitely cooling the activity in the technology and innovation sector, and it is expected that few M&A activity will occur until the government provides more certainty on the regulation applicable to platforms or businesses which have not been regulated at the time being.

Despite these difficulties, which are being experienced in a large number of countries around the world, the government of President Duque is strongly supporting the development of the functional creations, new media and software contents industry by granting very attractive tax incentives to investors, such as an income tax exemption for a term of seven years. This policy, called “Orange Economy” by President Duque, will most likely increase M&A activity and, particularly, investment rounds for young technology start-ups.

In order to fund the budget for 2020, the government of President Duque was analysing the possibility to sell certain strategic assets with the purpose to collect at least COP8 trillion. However, due to more efficient tax collection by the National Tax Authority (DIAN), unexpected profits generated by the Colombian Central Bank and an unexpectedly high distribution of dividends of Ecopetrol, the government obtained the resources necessary to cover the costs and investments for 2020. Even so, the Minister of Public Finances, announced that the government plans to sell certain non-strategic assets such as supply centres, automotive diagnostic centres, ports, transport terminals, television channels and other minority stakes held by the government.

In total, the government holds a minority participation in more than 66 companies, which are either insufficiently profitable or fail to fit adequately in the government’s long term plans. In short, the government divestment plan will probably boost M&A transactions throughout the succeeding years in a great variety of sectors.

Furthermore, the government’s decision not to sell strategic assets during 2020 is very likely to change for 2021, considering that the tax collection increase, the unexpected profits of the Colombian Central Bank and the distribution of profits of Ecopetrol were circumstances that will not repeat in 2021, considering the international oil prices and the more than expected reduction in profits in a large number of industries. With that in mind, and taking into account the sustained increase in the public expenses due to the Venezuelan migration to the country and costs associate with the crisis generated by the COVID-19 pandemic, there is a fair chance that the government will have to divest in certain strategic assets to fund its budget for 2021 and 2022, in which case major M&A transactions could be expected to come, especially in the energy sector.

In fact, the Minister of Public Finances has publicly stated that the country will have to acquire long-term debt to face the current needs derived from COVID-19, which will be a driver for the government to make further divestments with the aim to comply with the fiscal rule (regla fiscal).


In summary, Colombia is making significant progress in adopting best practices and investor friendly policies (there are currently 16 investment protection treaties entered into by Colombia), which, along with a sustained economic growth, fiscal discipline and inflation control rules, are laying the foundations for a nice setting for M&A transactions. In addition, several M&A success cases during the past few years have helped to build a strong confidence of the foreign investors in the country, which shows in the transactions forecasts prepared by several forecasting and quantitative analysis firms. For example, according to the Global Transaction Forecast 2020 prepared by Oxford Economics prior to the rise of COVID-19, Colombia was expected to have the largest proportional increase in cross-border M&A transactions (in value) during 2020-22, with respect to each preceding year.

Nonetheless, the impact of COVID-19 in the global economy will affect these forecasts as many international investors are expected to become even more selective and conservative in the coming months. Despite the modest growth projections globally, Colombia has one of the most solid economies of the region, making it capable of resisting externalities to a greater extent than its neighbours. Hence, it will remain a solid market that will continue to attract foreign investment during the years to come.

Baker McKenzie S.A.S.

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+571 3762 211
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Law and Practice


DLA Piper Martinez Beltran has four partners in its M&A practice, and 16 additional lawyers. Key practice areas include M&A (both local and international), transfers of assets, joint ventures and strategic alliances, due diligence, corporate reorganisations, leveraged buyouts, privatisations, shareholders’ agreements and business integration processes. Clients benefit from DLA Piper’s leading global M&A practice, which has acted in more M&A transactions than any other law firm in the world. The firm’s experience enables it to execute cross-border global deals seamlessly while supporting clients across all stages of the transaction and offering cost-effective, pragmatic business solutions. The team in Colombia has extensive experience in leading and structuring mergers, spin-offs and acquisitions of all sizes for national and international clients.

Trends and Development


Baker McKenzie S.A.S. is one of Latin America's award-winning law firms with one of the widest geographical coverages of the region. The firm is multidisciplinary and the firm's professionals are specialists in clients' industries. Technically and commercially top-skilled. the team is trained to anticipate risks in a permanently changing and globalised business environment. The firm's global network allows best-practices and knowledge exchange with some of the most influential business centres in the world. The firm's innovation centres represent a strategic investment to remain at the forefront of legal developments.

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