COSTA RICA Law and Practice Contributed by: Claudio Donato and Carolina Retana Herrera, Zurcher, Odio & Raven
6. Structuring 6.1 Length of Process for Acquisition/ Sale The length of the process for an acquisition will depend considerably on the size of the tar - gets, the extent of due diligence required by the buyers, the markets in which they operate and whether pre-execution approvals are required. The due diligence and execution timeframe will also change depending on the availability of information, but an approximate range is four to eight months. Following this, when authorisations are required by competition authorities, if a transaction will not affect relevant markets, its authorisation may take, in practice, approximately 30 days after its notification to the authority. If the transac - tion does cause competition risks, a period of 90 days should be added after the parties offer commitments to the authority. 6.2 Mandatory Offer Threshold When a private company that is not subject to special regimes or merger control is involved, Costa Rican regulation does not set a mandatory offer threshold. For public companies, certain thresholds shall be applicable depending on the specifics of the purchaser and the aimed participation per - centage to be acquired, which shall be legally assessed on a case-by-case basis. 6.3 Consideration The most common consideration in Costa Rican transactions is cash, usually through financing, as it provides more certainty of value as well as regulatory simplicity. Agreeing for shares to act as consideration is less frequent due to regula -
tory and valuation challenges, but is permitted and used; it would not be considered out of the ordinary to use shares as consideration. In transactions involving the real estate market, real estate assets are sometimes incorporated as consideration, which is unusual in other juris - dictions. In deals involving industries with high-value valu - ation uncertainty, the following tools that have been implemented to bridge value gaps: • earn-outs – the seller may receive additional payments based on the target’s future perfor - mance; • price adjustment mechanisms – either through working capital adjustments, based on the status at closing, or through net debt adjustments at delivery; • seller financing – vendor take-back through seller deferred financing may also be imple - mented; • continue value rights – the seller may receive additional payments based on the achieve - ment of agreed-upon milestones; or • escrows – partial amounts of the purchase price may be held to cover certain represen - tations, warranties, breaches and liabilities. 6.4 Common Conditions for a Takeover Offer In Costa Rica’s small public stock market, cer - tain requirements must be met in the context of a takeover of a publicly traded company. The offeror must disclose: • its existing participation in the target (if any); • any private agreements entered into with the target’s board of directors; • the consideration being offered; • the scope of the securities involved; and
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