PORTUGAL Law and Practice Contributed by: Duarte Schmidt Lino, Raquel Azevedo, Alexander Ehlert and Leonor Melo Bento, PLMJ
1. Market Trends 1.1 Technology M&A Market
potential sellers and buyers persists. This has led to an increased use of price adjustment mechanisms (such as earn-outs) as well as dual- phased acquisition processes – where buyers first acquire an initial stake in the target company and the remainder at a later stage, usually with an updated valuation. In the venture capital sector – and considering that the above-mentioned economic backdrop has not yet been fully overcome – one contin- ues to witness a substantial number of bridge/ extension rounds with existing investors, so as to attend to the (more urgent) funding require- ments of start-ups. Finally, growing importance can be seen being given to responsible business (environmental, social and governance – ESG) practices, social entrepreneurship, the blue/green economy and compliance, due also to recently enacted EU legislation (such as the Directive on Corporate Sustainability Due Diligence – CSDDD). 2. Establishing a New Company, Early-Stage Financing and Venture Capital Financing of a New Technology Company 2.1 Establishing a New Company Typically, if the new start-up’s base of operations is in Portugal, that is where entrepreneurs (Por- tuguese or foreign) will seek to incorporate the company. Compared to other EU jurisdictions, the incorporation of a new company in Portugal is a quick and simple process. If handled effi- ciently, the process can be completed within two to three weeks. The initial capital requirement for the incorpo- ration of a limited liability company by quotas
Like the global M&A market, the Portuguese M&A market continued to be affected through- out 2024 by the slow decrease of inflation and interest rates, and by the consequent high cost of capital. This economic backdrop continued to lead to lower deal volumes and lower company valu- ations in most sectors in the first nine months of 2024. In fact, transaction opportunities are being more thoroughly pondered and analysed by potential buyers/investors, which also leads to more slow-paced transactions. Even though in the last 12 months the tech- nology M&A sector in Portugal has not experi- enced substantial growth in aggregate terms (ie, encompassing both domestic and cross-border transactions), it continues to be the second most attractive and dynamic sector in Portugal for investments and M&A opportunities, rank- ing only after the real estate sector and ahead of other attractive sectors (such as renewable energy). In the first nine months of 2024, there was a significant increase in foreign acquisitions in the technology and internet subsectors, when compared to 2023 (as per Transactional Track Record’s 3T 2024 Iberian Market Report, avail- able here ). This is due in part to the increased global market demand for digital transition, which is a pillar of the Portuguese Recovery and Resilience Plan (PRR), and in part to the innova- tive companies and highly qualified talent in the Portuguese ecosystem. 1.2 Key Trends Even though in 2023 and in 2024 there has been a continuous shift from a sellers’ market to a more balanced market, a valuation gap between
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