BRAZIL Trends and Developments Contributed by: Rafael Lacerda, Eric Nahum, Rômulo Martins and Fernando Oliveira, Lacerda Diniz Advogados
Diligence: Earlier, Deeper and Data-Driven Diligence starts earlier and goes deeper. Beyond legal, tax and labour, investors now treat cybersecurity, pri - vacy and data-governance as core risk factors. In tech-enabled assets, IT reviews include architecture mapping, cloud contracts, API inventories and audit trails, which reduces integration overruns and clarifies capital expenditure (capex) needs post-closing. Vendor due diligence has re-emerged as a process accelerator, usually on a red-flag basis with non-reli - ance language. Buyers still run confirmatory diligence focused on value drivers and liabilities. High-quality data rooms, clean cap tables and proactive disclosure schedules can reduce price chips and widen the buyer universe. Governance and Incentives: Aligning Interests, Reducing Friction Brazilian private equity has converged on international best practice for management alignment. Sweet-equi - ty programmes paired with vesting (time, performance or exit-based) and good/bad leaver mechanics are standard. Management often receives tag-along pro - tections; drag-along thresholds are calibrated to avoid exit gridlock while preserving minority safeguards. Post-closing, governance leans on pragmatic boards and reserved matters rather than day-to-day interfer- ence. The most effective sponsors operate with KPI- based agendas, lightweight PMOs and clear 100-day and 180-day value-creation plans. This focus has improved retention, reduced churn in critical roles and tightened execution around pricing, mix and pro - ductivity. Sector Focus: Where Sponsors Are Leaning In Energy and infrastructure Transition themes and network services remain invest - able. Opportunities cluster around O&M services, distributed generation, transmission adjacencies and data centres. Contract diligence, merchant-price exposure and curtailment risks require careful mod - elling, but the system’s renewables share and policy focus underpin long-term theses.
in exchange for tighter reporting and stronger collat - eral packages. Sponsors are calibrating leverage to stress cases, not base cases. Covenants emphasise liquidity, cash conversion and timely remediation triggers. Hybrid stacks – equity plus private credit – balance downside protection with room to fund growth investments and bolt-on acquisitions without re-underwriting the whole capital structure. Structuring the Deal: SPVs, Liability Isolation and Sequencing Transaction architecture is stable and familiar to global investors. The prevailing model is a special purpose vehicle (SPV, BidCo) controlled by a local private equity fund vehicle, which isolates liabilities, organises financing and streamlines future exits. The fund typi - cally refrains from signing the main sale agreement, intervening only for capacity statements or regulatory compliance. In regulated industries, sequencing is the difference between clean execution and costly delays. Competi - tion clearance and sector approvals are co-ordinated with closing mechanics to avoid standstill breaches or gun-jumping exposure. Long-stop dates and inter - im covenants are adjusted to reflect realistic agency timelines and integration preparations. Documentation: Price Protection and Interim Control Contracts have absorbed recent lessons. Parties combine locked-box pricing in predictable businesses with closing accounts where working-capital swings are material. Escrows and holdbacks are used with tailored release windows per risk class, and MAC definitions are narrowed to true outliers rather than general macro drift. Interim operating covenants are more detailed. Buy - ers seek visibility and veto rights over extraordinary actions; sellers preserve commercial agility within pre-agreed budgets and KPIs. The result is a clearer “day-to-close” operating model that reduces friction and protects the headline valuation.
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