Beware successor liabilities in LatAm

Author: Zoe Thomas | Published: 24 Mar 2015
For buyers, a deal may involve more risks than meets the eye

Distressed M&A opportunities in Latin America may not be a sweet as they first appear. Buyers looking to acquire companies in distress could be left with unexpected successor liabilities.

Local counsel have explained that regulators’ and courts’ approach to successor liabilities means issues can crop up even when the target assets are not the original subject of a claim.

The uncertainty this creates has raised concern that buyers may stay away, or that companies will remain distressed because of pressure placed on raising new capital.

"If you are buying a company that is in some sort of distress it’s likely to have contingent liabilities that you will inherit," said Miguel Tornovsky a partner with Pinheiro Neto in São Paulo. "In Brazil there has been a disregard for the legal entity and there is a risk the buyer will...