PUERTO RICO Law and Practice Contributed by: Fernando J. Rovira-Rullán and Andrés I. Ferriol Alonso, Ferraiuoli LLC
1. Trends 1.1 M&A Market
economy could experience a certain level of distress and this trend could reverse. A new early trend in M&A deals in Puerto Rico, though still limited, has been an increase in the use of repre - sentations and warranties insurance. 1.3 Key Industries The main industries that could potentially continue to witness significant M&A activity in Puerto Rico are tourism and hospitality, export of services and goods, manufacturing, entertainment, construction, renewable energy, pharmaceuticals and healthcare, agriculture and finance. It is important to note that the vast majority of compa - nies located in Puerto Rico are privately held. Thus, the overwhelming majority of M&A transactions in Puerto Rico involve the purchase and sale or consolidation of privately held companies, which may result in highly negotiated deal terms, extensive due diligence and complex transaction structures. The main acquisition mechanisms available are: • an equity purchase (eg, stock or membership inter - est); • an asset purchase; or • a merger or consolidation. 2. Overview of Regulatory Field 2.1 Acquiring a Company In an equity purchase, the purchaser acquires the tar - get’s outstanding equity interest from its owners by means of an equity purchase agreement to be exe - cuted by and between the purchaser and the target’s owners. A purchaser could also acquire equity inter - est from the same target entity through a subscription agreement if the target entity will make an additional issuance of equity. Generally, an equity purchase requires the consent of the target’s individual owners and the purchaser’s governing body. In spite of the above, in the event that the purchaser holds at least 90% of the target’s interest, it may undertake a “short- form merger”. In such a merger, the parent company is able to merge the target into the parent without the
The 2026 M&A market in Puerto Rico, when com - pared with the 2025 market, is expected to experi - ence an increase in transactional activity. M&A activ - ity in Puerto Rico has continued at a steady pace throughout multiple industries including tourism and hospitality, professional services, renewable energy, healthcare, entertainment, finance, technology, con - struction and insurance, among others. Buyer confi - dence has improved as inflationary pressures have eased and both local and foreign capital has become more accessible. We expect that, as long as employ - ment and economic conditions continue to improve in Puerto Rico and the US economy does not go into a recession, transaction volumes in the local M&A mar - ket will likely continue on an upward trajectory. 1.2 Key Trends The trend caused by the proliferation of local private equity funds under Act 60 of 2019 (formerly under Act 185 of 2014, known as the Private Equity Funds Act, as it is now codified in Act 60 of 2019, as amended, known as the Puerto Rico Incentives Code) is expect - ed to continue to increase the pool of investable capi - tal ready to be deployed for the acquisition of Puerto Rico businesses. In recent years, these funds have expanded their investment mandates, increasingly participating in lending, growth‑equity and real estate development strategies. In addition, the Puerto Rico Incentives Code compiled local tax decrees, incen - tives, exemptions, subsidies, reimbursements and other tax benefits. As a direct effect, new players have entered into the Puerto Rico M&A market and there has been a notable increase in the volume of transactions. On the other hand, as happens with growing econo - mies, the distress associated with contracting econo - mies yields significant M&A activity. Although there is no publicly available data regarding M&A activity in Puerto Rico, the sale in bulk by local financial insti - tutions of distressed property loan portfolios, repos - sessed developments and residential and commercial properties has significantly reduced in transactional volume. However, if the US economy experiences a hard landing and goes into a recession, the local
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