Between August 2024 and August 2025, Brazil’s M&A and private equity activity showed signs of returning to a more stable pace. Deal numbers were slightly below the prior year but remained solid overall. Domestic buyers accounted for roughly four fifths of all transactions, with foreign investors making up the rest.

In the first six months of 2025, 633 deals were completed – a 6.1% decline compared to the same period in 2024, bringing the 12-month total to 1,385. This reflects a more selective approach from investors. While local transactions still dominated, cross-border activity regained momentum in 2025, led once again by US investors. Persistently high interest rates – around 15% on the Selic benchmark – kept financing expensive and put downward pressure on valuation multiples. This pushed deal makers towards more flexible structures such as earn-outs, vendor loans, and greater reliance on private credit.

The challenging funding environment and narrow capital market windows supported an uptick in take-private transactions and restructurings of listed companies. Corporate carve-outs, divestments aimed at portfolio optimisation, and private equity platform build-up strategies gained ground, while strategic buyers continued to actively participate.

Activity was spread across several sectors, with software/IT, financial services, food and beverages, energy and general services seeing the most deals. Initial public offering (IPO) activity remained muted, so most exits came via strategic buyers, secondary share sales and selective ABO/follow-on offerings.

In 2025, Brazil’s private equity and M&A market has been most active in business-to-business (B2B) software and other technology-enabled services (including cybersecurity and applied AI), renewable energy, healthcare and logistics/infrastructure.

High interest rates (Selic 15.00%, as of 30 July 2025) continue to compress leverage and valuations, encouraging earn-outs, vendor financing and private credit. Corporate carve outs, sector build ups and take privates at discounted prices have been common, while IPO windows remain narrow. Global supply chain realignments have supported nearshoring and local manufacturing. Cross border interest has been steady, with US- and Europe based buyers being active, and foreign exchange (FX) and tariff sensitivities reflected in sale and purchase agreements (SPAs) and business plans.

In recent years, two developments have been most relevant to private equity in Brazil: tax reform and the consolidation of the funds rulebook.

Tax Reform

Constitutional Amendment No 132/2023 merges ICMS, ISS, IPI, PIS and Cofins into CBS (federal) and IBS (state), with phased implementation from 2026 to 2032. Impacts include pricing, margins and valuation models, requiring careful tax planning in SPAs and integration plans.

Funds Framework

CVM Resolution 175 modernised fund regulation through various annexes. Under Annex IV, private equity investment funds (FIPs) remain equity- and quasi equity oriented vehicles (eg, shares, debentures, subscription warrants, convertibles and similar) and do not invest directly in crypto assets or carbon credits. Separately, the tender offer framework will be overhauled by CVM Resolution 215/2024 (replacing RCVM 85), with effectiveness postponed to 1 October 2025 by RCVM 230/2025.

Primary Regulatory Authorities

Brazil has no single, overarching regulator for private equity transactions. It is necessary to distinguish between direct investments and locally structured funds. For private equity deals carried out directly by offshore vehicles, no prior regulatory approval is required; registering the foreign direct investment with the Central Bank of Brazil (BCB) for foreign-exchange control purposes is sufficient.

By contrast, private equity funds organised in Brazil are regulated by the Brazilian Securities and Exchange Commission (CVM), which oversees their formation and operation, and the licensing of their managers. Regardless of structure, the Administrative Council for Economic Defence (CADE) remains a key authority for merger review in M&A transactions.

Merger Control

Both direct transactions and investments via local funds are subject to Brazilian antitrust review when the thresholds set by Law No 12,529/2011 are met – namely, when one party’s economic group recorded annual gross revenues in Brazil above BRL750 million and the other party’s group recorded at least BRL75 million. For private equity funds, CADE looks to the aggregated revenues of all portfolio companies under common management, which often requires a request for CADE approval.

CADE has also developed specific case law distinguishing purely financial investments from acquisitions conferring material influence. As a result, even minority stakes may constitute notifiable transactions when accompanied by special rights – such as vetoes over strategic decisions or board appointment rights. CADE Resolution No 33/2022 clarifies that holdings above 20%, or with qualified governance rights, will generally require prior notification.

Sectoral Regulation

Beyond merger control, private equity investors face sector-specific requirements in regulated industries, whether investing through local or foreign vehicles. In the financial sector, for example, the BCB must pre-approve acquisitions of relevant stakes, assessing not only the investor’s financial capacity but also the proposed governance framework and the manager’s track record. Similarly, investments in electric-power concessions require approval from the Brazilian Electricity Regulatory Agency (ANEEL), which reviews both technical and financial capabilities. In telecommunications, the National Telecommunications Agency (ANATEL) supervises changes of control, requiring lawful source-of-funds documentation and, often, partnerships with operators that demonstrate technical expertise.

Merger control in Brazil is a pre-closing, suspensory regime; standstill applies and gun-jumping enforcement is active.

Foreign Investment Restrictions

The Federal Constitution sets important constraints on foreign investors in strategic sectors, directly affecting private equity structures. Mining and aviation, for example, have specific national control requirements. As a result, international funds frequently use sophisticated co-investment arrangements with Brazilian partners to enable acquisitions in these sectors.

Treatment of Sovereign Investors

Although Brazil has no formal national security screening regime, investments by sovereign wealth funds in critical infrastructure or privatisations tend to attract greater political scrutiny. In practice, however, regulators apply the same technical criteria to sovereign investors as they do to private funds.

FSR

The EU’s Foreign Subsidies Regulation (FSR) does not apply directly to purely domestic Brazilian transactions, but funds with global portfolios should consider its potential impact on exit strategies. Global managers operating in Brazil have therefore implemented more comprehensive compliance procedures from the outset, properly documenting the source of funds and any subsidies received to facilitate future cross-border deals.

The FSR is distinct from EU member states’ foreign investment screening. FSR notifications are required only for concentrations meeting EU thresholds (including EUR500 million or more of EU turnover for at least one party, and EUR50 million or more in foreign financial contributions over the past three years) and are suspensory; the FSR does not apply to purely domestic Brazilian deals without an EU nexus.

Recent Developments, Compliance, ESG and Sanctions

While not recent, earlier reforms continue to shape private equity in Brazil: the 2020 Water and Sanitation Framework has kept opportunities open, with deals closing recently, and the 2021 Start-Ups Law continues to facilitate investments in high-growth companies through simplified instruments. Over the past 12 months, there have been no structural regulatory changes in anti-corruption, sanctions or ESG, but existing practices have consolidated and deepened. CVM Resolution No 59/2021 continues to have practical effects, driving the integration of ESG criteria into origination, due diligence and portfolio monitoring. Enforcement of Law No 12,846/2013 has become more rigorous, making more robust integrity due diligence standard market practice.

The scope of legal due diligence in Brazil is generally comprehensive, reflecting the complexity and inherent risks of the country’s legal framework. The depth of review, however, will depend on the size and profile of the transaction, the timetable available, and the level of competitiveness of the process. Red flags are typically identified across several categories, with those representing potential deal breakers receiving the greatest emphasis.

In practice, due diligence involves a combination of documentary review of materials made available in a virtual data room, management Q&A sessions and interviews, and meetings with relevant executives of the target company. Independent verification is also a standard element of the process, particularly through the review of certificates and filings issued by public authorities such as the Federal Revenue Service, judicial courts and other regulatory bodies.

Principal areas of focus include:

• corporate – capital structure, shareholder agreements, transfer restrictions and governance framework;
• contractual – material agreements, termination clauses and change-of-control provisions;
• regulatory – licences, permits and sector-specific compliance;
• labour and social security – liabilities, litigation and compliance with labour regulations;
• tax – contingent liabilities, tax litigation and the availability of special regimes;
• environmental – licensing and potential liabilities, where applicable; and
• certificates and filings – contested records from civil, tax or labour authorities.

The most significant contingencies in Brazilian practice typically arise in the tax, labour, social security and environmental areas. While some buyers may consider vendor-prepared reports, it remains standard market practice for acquirers to engage their own counsel and for advisers to conduct a full independent review of the target’s documentation and liabilities.

In regulated industries, an additional layer of analysis is required. Change-of-control approvals and regulatory notifications must be carefully sequenced with CADE’s merger control clearance and the mechanics of closing, to mitigate interim operating restrictions and avoid gun-jumping risks.

Ultimately, the topics outlined above are illustrative rather than exhaustive. The scope and depth of the due diligence review, as well as the identification of material risks, will vary depending on the target’s industry, which may require enhanced scrutiny of specific technical, operational or regulatory matters.

Vendor due diligence is not as prevalent in Brazil as traditional buy-side due diligence, but it has become increasingly visible in structured processes, particularly where sellers aim to prepare the company ahead of an M&A transaction and to set a clear valuation framework for prospective buyers. In these situations, the exercise is commonly referred to as “preliminary due diligence”, with legal and financial advisers engaged by the seller to prepare summary reports or fact books highlighting key risks, potential liabilities and mitigating measures.

Despite these efforts, buyers in Brazil rarely rely exclusively on vendor due diligence. Market practice is for sponsors and strategic investors to conduct their own independent investigations to validate the seller’s findings, ensure accuracy and address any potential information asymmetries. This reflects both the risk-averse nature of the Brazilian legal environment and the importance of tailoring diligence to each buyer’s investment thesis and governance requirements.

In competitive auction processes, vendor due diligence reports are usually provided on a red-flag basis, designed to accelerate the timetable and reduce execution risk. These reports are almost invariably accompanied by non-reliance provisions, limiting liability of the seller’s advisers. Buyers therefore rely on vendor reports mainly as a process management tool – helping to focus confirmatory diligence efforts, guide Q&A sessions and frame disclosure schedules – rather than as a substitute for their own analysis.

While vendor due diligence can be useful to streamline negotiations, it does not eliminate the need for comprehensive buyer-led diligence in Brazil. Ultimately, reliance on seller-prepared materials remains limited, and confirmatory due diligence continues to be viewed as essential for proper risk allocation, negotiation of warranties and indemnities, and overall deal certainty.

In Brazil, the vast majority of private equity acquisitions are executed through privately negotiated share or quota purchase agreements. This structure offers flexibility in negotiating purchase price, payment mechanisms and protective provisions, while also ensuring confidentiality.

Mergers, incorporations or court-approved reorganisation schemes are less common and are primarily employed in take-private transactions of listed companies or in more complex corporate restructurings. Tender offers (OPAs) are mandatory when acquiring control of publicly held companies and must comply with strict CVM requirements regarding pricing, timing and equal treatment of minority shareholders.

Privately negotiated deals allow for tailored structures and greater flexibility, whereas auction processes are characterised by standardised terms, compressed due diligence periods and heightened competitive pressure, often resulting in higher valuations. Irrespective of the structure, it is market practice to include investor protections such as material adverse change clauses, price-adjustment mechanisms and post-closing governance arrangements to safeguard investor rights and ensure alignment with management.

In public company transactions, Brazilian law mandates the launch of a tag-along OPA upon a change of control, requiring the acquirer to offer minority shareholders voting shares at no less than 80% of the control price (Article 254-A, Brazilian Corporations Law).

Enhanced protections are also available under B3’s premium listing segments. The Novo Mercado requires 100% tag-along rights for common shares, while Level 2 requires 100% tag-along rights for both common and preferred shares under the listing rules.

For delistings, an OPA will be deemed successful upon acceptance by holders of two thirds of the free float. CVM Resolution No 215 introduces calibrated alternatives for scenarios involving very low free float, effective as of 1 October 2025.

In Brazil, private equity-backed acquisitions are typically structured through a special purpose vehicle (SPV or BidCo), generally incorporated as a limited liability company (limitada) or a corporation (sociedade por ações), and directly or indirectly controlled by the private equity investment fund (FIP). The use of an SPV ring-fences liabilities, optimises tax efficiency, facilitates acquisition financing and provides greater flexibility for future divestments.

As a general rule, the FIP itself does not execute the main acquisition or sale agreements. Instead, it remains as a quotaholder or shareholder of the SPV, intervening only in specific circumstances, such as making capacity representations or complying with regulatory requirements imposed by authorities such as the CVM, CADE or BACEN.

Depending on the transaction design, commercial arrangements and agreed risk allocation, the FIP may exceptionally be required to act as a direct party to the transaction, thereby expressly assuming contractual obligations. However, market practice strongly favours the use of acquisition vehicles, with the FIP maintaining an indirect role to preserve liability isolation and regulatory compliance.

Private equity transactions in Brazil are predominantly financed with equity contributions from funds and co-investors. Given the relatively expensive and constrained local debt market, leveraged buyouts are less common. To provide contractual certainty on equity funding, equity commitment letters are widely used, particularly in cross-border deals or where purchase price payments are structured in instalments.

Where debt financing is involved, commitments are typically not fully available at signing. Instead, comfort is provided through bank or private credit fund commitments, satisfaction of precedent conditions, and contractual protections such as escrows, ticking fees or break-fee clauses.

Over the past 12 months, rising domestic interest rates have further increased the cost of debt, constraining leveraged structures and incentivising the use of private credit and enhanced collateral packages. These developments have been reinforced by the enactment of the Legal Framework for Collateral (Marco Legal das Garantias, Law No 14,711/2023). Equity commitment letters remain standard for the equity portion, while debt is generally supported by contractual safeguards. Equity therefore continues to be the principal source of financing.

In the context of public tender offers (OPAs), Brazilian regulations require funding and settlement certainty through a local financial intermediary, with guarantees for B3 auction execution in accordance with CVM and B3 rules.

Cross-border debt financing raises additional considerations. Interest remitted abroad is generally subject to withholding income tax (IRRF) at a rate of 15% (25% for payments to low-tax jurisdictions), subject to treaty relief. Deductibility of interest is limited by Brazil’s thin-capitalisation and transfer pricing rules.

In Brazil, private equity transactions involving multiple sponsors (club deals) and co-investments alongside the lead fund/GP have become increasingly common, particularly in larger-scale deals. These structures are typically set up through dedicated vehicles (SPVs) and governed by co-investment agreements that define governance rules, veto rights and exit mechanisms. Co-investors may be limited partners of the fund itself (making additional passive contributions) or external investors participating directly on a deal-by-deal basis.

Consortia combining private equity funds and corporate investors are less frequent but do occur in strategic sectors such as infrastructure, energy and technology. In such cases, the corporate investor brings sector-specific expertise and operational synergies, while the fund contributes capital and M&A expertise. The growing presence of corporate venture capital (CVC) funds has further encouraged this type of partnership in the Brazilian market.

In Brazil, regardless of the mechanism adopted, the allocation of liability for indemnification generally follows the “my watch, your watch” logic, whereby the seller is liable for losses incurred prior to closing and the buyer is liable for events occurring thereafter.

In the case of a locked box, special attention is given to the base date as a reference for indemnification, since the seller continues to manage the company until closing.

Earn-outs are particularly common in contexts of economic uncertainty or when there is a significant difference between the seller’s and buyer’s valuations. They function as a “pay to see” mechanism that mitigates the risks of overly optimistic projections and keeps the selling partners engaged in the performance of the business during a transition period. This alignment is especially useful in sectors such as technology and healthcare, where future growth is critical to justifying the valuation.

Deferred consideration is a more direct solution for making payment more flexible, usually structured as fixed instalments paid after closing. In addition to facilitating the buyer’s cash flow, it is common for part of these amounts to be retained in an escrow account to cover any tax, labour or regulatory liabilities not identified in the due diligence, which is particularly relevant given the complexity of Brazilian regulations.

Rollover structures – in which sellers reinvest part of the amount received in the company itself under a new control structure – have become more common, especially in private equity transactions. This configuration preserves the alignment of long-term interests, keeps key executives motivated and, for the buyer, reduces the need for immediate cash outlay. Rollovers are especially popular when investors want to retain the seller’s knowledge and leadership to accelerate business growth.

The presence of a private equity fund tends to influence the choice of mechanism and the level of detail of the protections. Purchasing funds generally seek greater predictability and security, favouring locked boxes with leakage clauses and, when there are completion accounts, clear adjustments and post-closing audits. As sellers, funds prefer more direct and faster payments, avoiding excessive withholdings or highly conditioned earn-outs, given their investment cycle and need for returns to shareholders. Other types of buyers or sellers may accept more flexibility, considering long-term strategic objectives.

In Brazil, in private equity transactions using locked box pricing structures, it is not common practice to charge interest on the share price after the base date, nor to apply interest on losses incurred between the base date and closing. The price is fixed considering the financial statements on the base date, and the seller remains responsible for managing the company until closing, avoiding unauthorised withdrawals (leakage). Any losses or deviations in value are normally compensated by direct adjustments to the price or refund, rather than by applying interest.

Although in international markets some transactions include a pro rata surcharge (ticking fee) to compensate for the opportunity cost between the base date and the closing, in Brazil this practice is an exception and depends on specific negotiation. The prevailing logic is that all results and risks after the base date are allocated to the buyer, and any adjustments are handled contractually, without automatic interest.

In Brazil, it is common for transactions of this type to include dispute resolution mechanisms related to consideration structures, especially when these involve complex calculations or future metrics, as is the case with completion accounts or earn-outs. Depending on the value of the transaction, the complexity of the parties and the structure of the transaction, these assessments are often conducted by large auditing firms and/or independent experts, ensuring impartiality and credibility in the determination of price adjustments.

The dispute resolution mechanism is usually tiered: initially, the party that identifies a disagreement notifies the other party; then, the parties mutually agree on an independent auditor to analyse the issue, and only if there is no consensus between the parties can the dispute be referred to arbitration, as provided for in the contract. This system ensures that arbitration serves as a last resort, preserving faster and more collaborative solutions.

In contrast, in fixed-price with locked box structures, where the value of the company is determined based on a date prior to closing, the need for experts or formal resolution mechanisms tends to be lower, being triggered mainly in cases of breach or interpretation of contractual clauses, since financial adjustments are already defined in advance and post-closing risks are allocated to the buyer.

In Brazil, in addition to conventional conditions precedent, it is common for transactions to include supplementary conditions depending on the size and complexity of the target company.

For targets engaged in regulated activities – such as oil and gas, electric power, telecommunications or air transportation – additional consents or notifications from the relevant regulatory authorities may be required. Transactions may also be conditional upon clearance from CADE (the antitrust authority), the Central Bank of Brazil (BACEN) or other financial regulators.

Third-party consents are also a frequent requirement, particularly where the target has key contracts with strategic customers, exclusive suppliers or business partners. Bank financing arrangements in Brazil commonly contain change-of-control provisions requiring lender consent prior to the transfer of ownership.

Certain sectors impose foreign investment restrictions, including the ownership and management of rural land, businesses located along international borders, and companies engaged in the publication of newspapers, magazines or the operation of radio and television networks.

It is also market practice to condition closing on the maintenance of agreed financial covenants or the absence of events materially adverse to the value of the business between signing and closing.

In smaller or less complex transactions, some of these conditions may be simplified or dispensed with, whereas in larger or strategic deals they are considered standard and effectively mandatory.

As to timing, CADE typically clears fast-track merger filings within approximately 15–20 days and ordinary-track filings in around 94 days, based on recent averages. These benchmarks are often used when negotiating the long-stop date.

There is a clear distinction between merger control conditions and conditions tied to foreign investment or highly regulated sectors. “Hell or high water” obligations tend to be more cautiously negotiated where sectoral or foreign investment constraints may require divestitures or burdensome remedies. For EU related deals, note that EU member states’ foreign direct investment (FDI) screening is distinct from the FSR. The FSR requires notification and standstill for concentrations only when EU thresholds are met (including at least one party with EUR500 million or more of EU turnover, and the parties having received EUR50 million or more in foreign financial contributions over the past three years), and it does not apply to purely domestic Brazilian transactions.

In Brazil, the payment of break fees in favour of the seller is relatively uncommon, being more frequent in initial or competitive transactions. Typical triggers include:

• termination of the transaction without cause by either party;
• failure to obtain essential regulatory approvals; or
• breach of important conditions precedent.

These fees tend to disappear in advanced stages of negotiations, especially after the signing of definitive agreements.

Brazilian law does not impose specific restrictions, but the amounts must be reasonable and proportional to the risk of the transaction. They can usually be stipulated as a specific penalty related to the costs incurred to date or as a percentage of the acquisition price, which usually varies between 1% and 5% of the transaction value. Reverse break fees are even rarer, but may be applied in specific situations, usually ranging between 4% and 6% of the transaction value.

For the buyer, the most common reasons for termination include:

• failure to obtain essential regulatory approvals;
• material breaches of the target company’s representations and warranties; or
• significant adverse changes in the business that substantially affect the value of the transaction.

For the seller, termination is more limited, relating to the buyer’s failure to comply with representations and warranties or conditions precedent, such as approval by governing bodies.

The deadline for fulfilling the conditions precedent or closing the transaction is typically set between 90 and 180 days after the signing of the purchase agreement, depending on the complexity of the transaction and the need for regulatory approvals. In more complex transactions or those subject to multiple regulatory agencies, the deadline may be extended, by agreement between the parties, to accommodate reasonable delays without automatic termination.

In Brazil, the allocation of risk in private equity transactions is generally more structured and predictable than in corporate deals, reflecting the need for private equity funds to safeguard returns for their investors. The prevailing approach is the “your watch, our watch” model, under which the seller bears responsibility for liabilities arising prior to closing, while the buyer assumes responsibility for post-closing events.

In corporate transactions, risk allocation is often more flexible and subject to strategic negotiation. In contrast, private equity deals place greater emphasis on limiting the seller’s post-closing exposure and providing predictability regarding indemnification obligations, with mechanisms such as caps on liability, claim periods, deductibles, exclusions of indirect losses, and insurance coverage.

Furthermore, private equity funds typically prefer more straightforward consideration structures and formal dispute resolution mechanisms where future metrics are involved, reinforcing a disciplined approach to risk allocation compared to purely corporate transactions.

In Brazil, private equity sellers often limit their representations and warranties to typical fundamentals, such as ownership of shares, capacity and authority. When the seller is a buyout fund, it is common for it to provide basically the same warranties as other shareholders, who generally rely on the warranties provided by the managers. However, the fund does not assume joint liability with other shareholders, avoiding any obligation that could be interpreted as a guarantee in favour of third parties.

Typical limitations of liability in transactions include:

• indemnification cap;
• claims periods – typically two to five years for tax or labour contingencies and one to two years for all others;
• exclusions – indirect losses, lost profits, moral damages or loss of business opportunities;
• deductibles/de minimis – small amounts related to recurring liabilities; and
• known issues – liabilities identified or disclosed in due diligence do not give rise to additional liability.

Buyers often include anti-sandbagging clauses, preventing claims for facts that were already known or disclosed.

In addition to the warranties and indemnities already mentioned, it is common to use escrow or price retention to back the seller’s obligations, especially in relation to fundamental, commercial and tax warranties. Lock-up clauses may also be applied after closing, restricting sellers or key executives from selling shares or engaging in transactions that could affect the value of the company. Real guarantees, such as fiduciary transfer of shares or quotas, are also used to provide additional security to the buyer in case of default.

The use of warranty and indemnity insurance is still relatively rare in Brazil, but when adopted it usually covers mainly fundamental and commercial warranties; in some cases, it may also cover tax issues. These protections aim to reduce the risk of the transaction and ensure business continuity, protecting the interests of the buyer and the private equity fund involved.

Litigation is not the norm in private equity transactions, but when it does occur it mainly involves price adjustments, earn-outs and breaches of warranties (especially tax and labour warranties), and is referred to the arbitral tribunal chosen by the parties in the arbitration clause included in the transaction documents.

It may also involve breaches of non-competition and non-solicitation obligations, as well as non-payment by the buyer of deferred instalments of the purchase price (if applicable).

Although Brazil has relatively few listed companies and many have a defined controlling shareholder, public to private (“delisting”) transactions do occur. In practice, these processes often combine:

• a control transfer (if applicable) with a tag along OPA at not less than 80% of the control price for voting shares; and
• a delisting OPA supported by an independent valuation report.

The company’s board issues a reasoned opinion, and the Investor Relations Officer must keep the market informed throughout the offer period. A delisting OPA succeeds upon acceptance by two thirds of the free float. CVM Resolution 215 (effective 1 October 2025) introduces calibrated alternatives for very low free float scenarios, while preserving minority protections.

Under CVM Resolution No 44/2021, any investor whose participation in a listed company reaches or exceeds 5% of the outstanding shares of any class, and at each subsequent 5% increment, is required to submit a material shareholding disclosure. The disclosure must include:

• information on the purpose of the acquisition;
• any executed agreements;
• whether the shareholder intends to seek control of the company; and
• any other instruments that may result in additional share ownership.

The 5%, 10% and 15% (and subsequent) thresholds apply to all classes or types of shares, and the disclosure obligation also extends to derivative positions. The investor must promptly notify the issuer, which is then responsible for disclosing the information to both the CVM and B3.

Brazilian law requires a mandatory tender offer (OPA) in specific circumstances:

• increase of controlling shareholder’s stake – when the controlling shareholder, or an affiliated party, increases its holdings to more than one third of the outstanding shares of any category or class;
• delisting – when the company seeks to delist its shares and go private; and
• sale of control – upon the transfer of control, the purchaser must launch a tender offer to acquire voting shares held by minority shareholders at a price of no less than 80% of the per-share price paid for the controlling block.

Enhanced protections under B3 premium listing segments include:

• Novo Mercado – 100% tag-along rights for common shares (ON); and
• Nível 2 – 100% tag-along rights for both common (ON) and preferred shares (PN).

In Brazil, cash is the most common form of consideration in tender offer transactions. The regulatory framework emphasises funding certainty and the prevention of abusive conditions.

Under CVM Resolution No 85, all tender offers must:

• have their financial settlement guaranteed by a licensed financial institution; and
• be intermediated by a duly authorised broker or dealer.

In control-transfer situations, tag-along tender offers must be priced at no less than 80% of the per-share price paid for the controlling block, pursuant to Article 254-A of the Corporations Law.

All OPAs are intermediated by a licensed financial institution and settled through B3, with the necessary guarantees in place.

The offer does not depend on the direct or indirect actions of the offeror or its related parties. Permissible conditions generally fall into three categories:

• macroeconomic risks – protect the offeror against systemic disruptions, such as war, banking crises, restrictions on access to funds, or significant adverse changes in market indicators;
• regulatory risks – address potential changes in the legal or regulatory framework that could impact the transaction; and
• target company risks – relate specifically to the financial and operational situation of the target, typically framed as the absence of a material adverse effect (MAE) reflecting no significant undisclosed deterioration in assets or value.

From 1 October 2025, CVM Resolution No 215 will replace Resolution No 85. The new framework prohibits conditioning tender offers on obligations assumed by the bidder with the financial intermediary, thereby reinforcing funding certainty and equal treatment of shareholders.

Under Brazilian corporate law, a bidder may obtain effective control of a company by acquiring a majority of its voting shares, even without holding 100% of the equity. Control generally grants the right to elect the majority of the board of directors and to direct the company’s strategic decisions.

From a governance perspective, control can also be exercised through negotiated arrangements, even without majority ownership. Such arrangements may include rights to appoint one or more board members, veto powers over specific strategic matters, or supermajority requirements for certain corporate actions.

The most common squeeze-out mechanism in Brazil is through a delisting tender offer (cancellation of registration), which requires acceptance by holders of two thirds of the free float.

CVM Resolution No 215 introduces calibrated alternatives for delisting tender offers in scenarios of very low free float, while maintaining minority shareholder protections.

The practice of obtaining irrevocable commitments from controlling shareholders in public takeover transactions is relatively rare in Brazil, because of the typical structure of Brazilian publicly traded companies, which usually have a controlling shareholder or a group rather than widely dispersed ownership.

Over the past two decades, partnership and stock option programmes have become widely used in Brazil as strategic tools to attract and retain key management talent, while providing competitive compensation structures.

The distinction between market segments is relevant. In middle-market companies, equity incentive plans often emphasise not only economic rights but also governance participation, granting management a voice in corporate decision-making and alignment with shareholders in operational matters. By contrast, in larger companies, incentive structures are primarily oriented towards economic rights, with a stronger focus on linking management rewards to financial performance and long-term value creation, rather than day-to-day governance.

In Brazil, partnership and stock option programmes are most commonly structured through sweet equity mechanisms, aimed at aligning management’s interests with those of the private equity sponsor and incentivising long-term value creation. Under this model, managers are typically granted equity instruments at favourable terms, which generate returns only if the investment is successful, thereby linking compensation directly to company performance and exit outcomes.

These participations may take the form of different classes of shares or quotas, depending on whether the company is organised as a corporation (sociedade por ações) or limited liability company (limitada). They are usually subject to vesting conditions, which may be tied to time of service, achievement of performance targets, or completion of an exit transaction. In practice, vesting is frequently structured on a three-to-five-year schedule, often combined with partial cliff periods and incremental vesting thereafter.

It is also market practice to include good leaver and bad leaver provisions, establishing differentiated treatment for management depending on the circumstances of departure, as well as forfeiture clauses to prevent unvested equity from remaining with executives who leave the company prematurely. In addition, equity incentive arrangements are often combined with drag-along and tag-along rights, ensuring alignment between managers and sponsors in the context of an exit.

Overall, Brazilian sweet equity structures have become increasingly sophisticated over the past decade, reflecting both global private equity practice and the requirements of local corporate law and CVM regulation. They are now a standard feature in management incentive planning, particularly in mid- to large-cap transactions.

In Brazil, vesting and leaver provisions are standard features of management equity incentive structures, serving primarily as retention tools to ensure long-term alignment between management and investors. Vesting schedules are commonly structured on a time basis (typically three to five years) and may also be linked to performance milestones or an exit event, ensuring that management incentives are tied to value creation over the life of the investment.

Leaver provisions are typically divided into two categories: good leaver and bad leaver. Good leaver provisions generally apply in cases such as retirement, death, disability or termination without cause, allowing the departing executive to retain all or part of the vested equity at fair market value. Bad leaver provisions, on the other hand, cover situations such as voluntary resignation, dismissal for cause or breach of fiduciary duties, often requiring the executive to forfeit unvested equity and to sell any vested equity back to the company or sponsor at a discounted price.

These provisions are crucial to determining the value attribution of management shares at the time of departure, and act as a deterrent against conduct misaligned with shareholder interests. In practice, they are heavily negotiated and carefully calibrated to balance management retention with investor protection, and have become a cornerstone of private equity incentive planning in Brazil.

In Brazil, restrictive covenants such as lock-ups, non-competes, non-solicitation and confidentiality provisions are frequently included in partnership and stock option programmes as a means of protecting investor value and ensuring management alignment. These covenants are typically enforceable when linked to equity participation and carefully structured in connection with incentive plans.

By contrast, in the context of employment contracts, restrictive covenants are far less common and may even be challenged as unenforceable if deemed to unduly limit an employee’s constitutional right to work. Brazilian case law has developed the understanding that post-employment non-compete clauses can only be enforced where they are reasonable in scope, duration and geography, and where adequate financial compensation is paid. Courts have often characterised such compensation as a form of “complementary salary” payable to the professional during the restricted period.

As a result, best practice in private equity transactions is to include restrictive covenants within equity incentive agreements rather than purely in employment contracts, and to provide for specific consideration in the event of post-termination non-competes. This approach balances enforceability with fairness and aligns with prevailing Brazilian jurisprudence.

As noted in 8.1 Equity Incentivisation and Ownership, the governance rights of management shareholders in Brazil vary significantly depending on the size and structure of the company. In mid-market transactions, it is not unusual for management to be granted veto rights over certain operational or technical matters within their area of expertise, particularly where their contribution is considered essential to the success of the business. Such rights typically relate to day-to-day operations or specialised areas, rather than broader corporate strategy.

By contrast, when it comes to more complex or strategic corporate decisions – such as the admission or exit of a private equity fund, capital increases, reorganisations or liquidity events – management shareholders rarely hold veto powers. While minority protections may prevent undue dilution of their equity stake, ultimate control over strategic direction remains with the sponsor or majority investors.

This balance reflects prevailing Brazilian practice: management shareholders are given a meaningful voice in operational matters to secure alignment and retention, but strategic decisions with direct impact on ownership and exit are reserved to the controlling investor.

Private equity funds in Brazil typically secure the right to appoint at least one member of the board of directors, with additional seats proportional to their equity stake. In majority deals, it is common to appoint the board chair and non-voting board observers. For significant minority positions, funds often negotiate the right to appoint a C-level executive (usually the CFO). Where the fund is structured as a Fundo de Investimento em Participações (FIP), there is a statutory obligation to exercise effective influence over the portfolio company’s decision-making.

Shareholders’ agreements generally set out reserved matters requiring qualified approval, such as:

• amendments to the company’s certificate of incorporation or by-laws;
• M&A transactions and corporate reorganisations;
• indebtedness above pre-set thresholds;
• related-party transactions;
• dividend policy;
• annual budget approval; and
• hiring or dismissal of key executives.

Information rights typically include:

• monthly or quarterly financial statements;
• detailed management reports;
• appointment of an independent external auditor; and
• the right to conduct specific audits when needed.

Brazilian law adopts separate corporate personality between shareholders and companies, with notable exceptions relevant to private equity. Piercing the corporate veil may occur in cases of abuse evidenced by purpose deviation or asset commingling, though it is rarely applied to funds in the absence of proof of specific misconduct. Sector-specific risks include:

• joint and several labour liability within an “economic group”;
• consumer liability where there is effective control;
• environmental liability where the corporate structure obstructs remediation; and
• tax liability extending personally to managers or officers for acts ultra vires or in violation of law.

These risks are commonly mitigated through intermediate holding companies, clear operational separation, robust compliance programmes at the portfolio level, and D&O insurance.

In Brazil, private equity exits over the past 12 months have taken place through a range of structures beyond the traditional private sales to corporates or other financial sponsors and IPOs. The most notable development has been the increased use of delistings and take-private transactions conducted through tender offers, a trend exemplified by the Cielo transaction in August 2024. With the IPO window effectively closed, sponsors have turned to this mechanism as a practical and timely path to liquidity.

Another relevant route has been partial sell-downs, particularly through follow-on offerings and accelerated block trades on B3, which allow funds to crystallise returns in stages while avoiding the complexities of a full IPO. Although still at an early stage in the local market, general partner-led secondary transactions and continuation funds have started to emerge, reflecting international practice and providing an alternative to more conventional exit routes. Recapitalisations, such as dividend recaps, remain relatively uncommon due to the high cost of local debt, but there has been selective uptake supported by the growth of private credit markets – a trend reinforced by the enactment of the Legal Framework for Collateral (Law No 14,711/2023).

As regards dual-track and triple-track processes, genuine dual-track exits – where an IPO and a sale process are prepared and run concurrently – have been rare in the current environment. While sponsors occasionally prepare for both options in parallel, the lack of IPO activity has meant that most of these processes conclude as private sales. Triple-track processes, combining a sale, an IPO and a recapitalisation, are even more unusual in Brazil. Where considered, the recapitalisation track generally plays the role of a fall-back option, supported by private credit financing rather than a fully competitive third pathway.

On rollover and reinvestment practices, the prevailing market custom remains a clean break, with private equity sellers typically seeking to exit fully at the time of sale, particularly in transactions with corporates. Nevertheless, in sponsor-to-sponsor deals and strategic combinations, it is increasingly common for sellers to roll over a minority stake. This allows them to capture future upside and to bridge valuation gaps, while aligning interests with the new controlling investor. Such rollovers are normally accompanied by governance protections, including board representation and veto rights over reserved matters, as well as economic protections such as earn-outs or ratchet mechanisms.

From a regulatory perspective, delistings and tender offers continue to be subject to the public offer framework overseen by the CVM and B3, requiring an offer to the free float in order to complete the transaction. Importantly, the tender offer regime will be updated by CVM Resolution No 215, which will come into force on 1 October 2025. This new framework replaces Resolution No 85 and is expected to reinforce funding certainty and equal treatment of shareholders, which will be directly relevant to private equity funds considering exit alternatives that involve listed companies.

In summary, while trade sales remain the predominant form of exit, the past year has seen an increased reliance on delistings, partial sell-downs and, to a lesser degree, emerging secondary structures. Dual-track processes are uncommon in practice, triple-tracks are extremely rare, and rollovers are used strategically but are not the prevailing practice in Brazil.

For institutional investors, drag rights are typically negotiated at thresholds ranging from a simple majority (more than 50% of the voting capital) to two thirds, reflecting the level at which a shareholder is effectively able to dictate the strategic direction of the company. In many sponsor-backed deals, the drag threshold is aligned with the level of control needed to approve extraordinary corporate matters, ensuring that minority investors can be compelled to sell if the controlling sponsor determines an exit.

Tag-along rights are equally common and, in most cases, are set at 100% of the stake being sold by the controlling shareholder, especially in transactions involving institutional investors. This standard reflects both market practice and the statutory baseline under Brazilian corporate law, which grants minority shareholders in public companies a mandatory tag-along at 80% of the price per voting share paid for the controlling block (Article 254-A of the Corporations Law). In private companies, however, contractual arrangements typically provide for full (100%) tag-along rights, ensuring equal treatment among shareholders.

Management shareholders often negotiate more limited protections. It is not unusual for managers to benefit from tag-along rights, but subject to higher thresholds (eg, only in the event of a sale of control) or to receive a proportionate allocation rather than a guaranteed full exit. Drag rights against management are standard, however, to avoid obstructing an exit process. By contrast, institutional co-investors generally demand both robust tag-along rights and carefully calibrated drag rights, with specific carve-outs to protect their governance prerogatives or veto rights.

In practice, the balance of drag and tag mechanisms reflects the relative bargaining power of the sponsor, management and co-investors, but their inclusion has become a consistent and almost universal feature of Brazilian private equity equity arrangements.

In Brazil, when private equity sponsors exit through an IPO, lock-up arrangements are standard and typically range from 180 to 360 days, depending on market conditions and the size of the offering. These lock-ups are designed to provide stability and investor confidence during the aftermarket period and are often applied not only to the private equity seller but also to management and other significant shareholders.

Relationship agreements between the sponsor and the issuer, as seen in some other jurisdictions, are not a typical feature in Brazilian IPOs. Instead, governance and shareholder arrangements are usually addressed prior to the IPO through shareholders’ agreements, which are either terminated upon listing or adapted to comply with B3 listing segment requirements – particularly Novo Mercado and Nível 2, which impose heightened governance standards.

Private equity-led IPOs also present some particularities. It is common for sponsors to negotiate priority allocations in the event of follow-on offerings to allow for staged sell-downs over time. The use of dual-class structures is not permitted under Novo Mercado rules, which require one-share-one-vote common shares, thereby limiting certain governance arrangements often seen in other markets. Additionally, private equity-backed issuers are frequently scrutinised for related-party transactions, governance independence and post-IPO liquidity given the relatively concentrated ownership structures that can persist following the listing.

Overall, while lock-ups are strictly observed, the Brazilian IPO framework prioritises equal treatment of shareholders and enhanced governance, which means that the influence of private equity sponsors tends to diminish progressively following listing.