The Covid-19 pandemic has caused an expected impact on M&A transactions during 2020. Despite the relative uncertainty regarding the extent of the pandemic and its effects in 2021, a strong recovery in transactional activities and, in particular, in M&A transactions has been observed since the end of last year: from a total of 615 transactions in the first half of 2020, the M&A sector recorded a total of 916 transactions in the same period of 2021, an increase of 48%.
This increase has been supported by an increase in various M&A modalities, whether via direct foreign investments, acquisitions by private equity funds, or bilateral operations between Brazilian companies (many of them capitalized by recently completed IPOs) that seek to consolidate their market position via acquisitions. The healthcare, retail, real estate, and education sectors have been some of the most active, but the technology sector continues to lead in number of transactions and amounts involved, bringing in some innovation for the usually rigid M&A contracts.
Among the technology companies that have attracted the attention of investors are SaaS (Software as a Service), e-commerce companies, information technology, big data, artificial intelligence, and "tech" companies in general (fintechs, proptechs, insurtechs, techfins, among others). This attractiveness is due to various vectors: digital transformation of life in general, greater scalability and density in the consumer market, less dependence on the public sector, potential for higher margins, and a "buyer's market" for investors who want to dispose of their assets.
From the point of view of innovation in operating structures, it is worth mentioning the dynamism that business in the technology sector has imposed on market players. It is not uncommon for investors in the sector to adopt an approach very similar to that of aggressive venture capital funds, even if the asset in question is not necessarily embryonic: due diligence of reduced scope, limited indemnity and, sometimes, structuring of the transaction via an offshore holding company, with the adoption of standardized contracts (either the purchase and sale agreement or the shareholders' agreement), all in preparation for new funding rounds for the target asset, or even a possible IPO in possibly more liquid markets.
Even with this dynamism, however, issues such as compliance with the General Data Protection Law are always a major point of attention for transactions in the sector, given the access that technology companies generally have to the personal data of a large number of users.
Audits focused on verifying compliance with the law and on whether the company adopts programs and codes for its employees have been increasingly frequent. The question is whether the new molds for transactions involving technology companies will impose themselves on more traditional M&As as well.