SECTION 1: Market overview
1.1 What have been the key trends in the M&A market in
your jurisdiction over the past 12 months and what have been
the most active sectors?
The Portuguese market in 2016 has seen over 300 M&A
transactions, according to Transactional Track Record (TTR).
The total aggregate deal value (disclosed for 120 of the
transactions) was €12 billion. Last year and for the
second consecutive year real estate was the most dynamic
subsector. We also highlight the 54% growth in the financial
and insurance subsector, which saw 40 transactions.
Despite the severe impact of the financial and economic
crisis on the Portuguese economy, the efforts undertaken in
recent years and the current economic environment allow us to
look with optimism – although moderate – to
the M&A market. The majority of the registered transactions
refer to acquisitions made by foreign entities in Portugal
(inbound transactions), particularly by US, Spanish, French and
UK companies. The outbound transactions – acquisitions
made by Portuguese companies abroad – have mainly
occurred in Spain, Brazil and France.
1.2 What M&A deal flow has your market experienced and
how does this compare to previous years?
The official figures regarding M&A deal flow in the
national market have not yet been disclosed. However, based on
our experience and ongoing transactions we believe 2017 will
see more inbound than outbound activity. Regarding the amounts
involved, in a market like the Portuguese market, in which most
of the companies are SME, it is foreseeable that the majority
of transactions will be of a medium value.
Regarding the type of investments and/or transactions, we do
not expect many changes for 2017. Trends will be similar to the
past five years, with the traditional M&A operations
largely dominating the market.
1.3 Is your market driven by private or public M&A
transactions, or both? What are the dynamics between the
Considering the size of the Portuguese M&A market we are
not able to identify a clear trend regarding public or private
transactions. During periods of privatisations, it is normal
for the public market to be more active, with public companies
becoming privately owned (or where the majority of the share
capital is held by private entities).
However, following the privatisation of TAP, the Portuguese
aviation company, we do not expect that any further
privatisations will take place in the medium term. As in the
previous year, Portugal will remain an attractive market for
foreign investors searching for opportunities through the
acquisition of distressed assets. We are still witnessing the
sale of assets at reduced prices, conducted mainly by a fragile
financial sector searching to clean up balance sheets and
secure more liquidity. This will most certainly increase
foreign investment in Portugal. In this regard, we must
highlight the sale of Novo Banco, which is expected to conclude
SECTION 2: M&A structures
2.1 Please review some recent relevant M&A transactions
in your market and outline any interesting aspects in their
structures and what they mean for the market.
Please see answer to Section 1.3.
2.2 What have been the most significant trends or factors
impacting deal structures?
We believe that the strategy of disinvestment in
non-strategic and distressed assets will remain a trend in
2017. After experiencing a period of some growth, many
companies have chosen to sell non-strategic assets.
The recovery of the Portuguese economy is still moderate and
Portuguese banks (which are an important factor for the growth
of the M&A market) still have an important number of
non-productive assets on their balance sheets. The Portuguese
financial system is also aware that some risks may seriously
compromise GDP growth. Those risks mainly rest on a global
economic downturn, which would impact foreign demand for
Portuguese exports namely from important commercial partners
such as Brazil or Angola. Brexit may also impact the Portuguese
Internal demand may be subject to adjustments resulting from
the need for additional budgetary measures; because the deficit
target has also been difficult to achieve in a situation where
private indebtedness may be an obstacle to investment, despite
the monetary policy pursued in the last years by the European
The amount of credit granted by the Portuguese banks is
still low, given the context of deleveraging of the
non-financial sectors of the economy. Persisting low interest
rates have contributed to the decrease of the spread over
deposit accounts in Portuguese banks, a tendency maintained in
2016, and has compensated the reduction of credit spreads.
Levels of profitability in the banking sector since the
beginning of the financial crisis has limited their capacity
for internal capital generation.
Despite some recent signs of improvement, the Portuguese
economic environment is still challenging and poses an
important degree of uncertainty to Portuguese issuers seeking
external financing. There is also an external risk of a global
economic downturn due to volatility in the international
financial markets and political instability in the European
Union due to Brexit.
These factors, combined with the reduction of public and
private indebtedness, the possible need of further adjustments
in the labour market and the tax pressure on private and
corporate income represent an economic and political
environment always subject to revision.
SECTION 3: Legislation and policy changes
3.1 Describe the key legislation and regulatory bodies that
govern M&A activity in your jurisdiction.
In addition to general corporate laws and the companies law,
the M&A sector is governed by the Portuguese Securities
Code (PSC) and ancillary legislation. Depending on the
companies involved, other specific laws may apply (for example
financial institutions laws).
3.2 Have there been any recent changes to regulations or
regulators that may impact M&A transactions or activity and
what impact do you expect them to have?
The recent tax law and regulation changes both in Portugal
and in the European Union, and tax increase and tax benefit
reductions may have a negative impact on M&A activity. This
is easy to understand if we bear in mind that several measures
adopted to achieve budgetary consolidation, economic stimulus
and to support the banking system have led to an important
increase of public indebtedness. In a context of low GDP
growth, the need to balance public finances in the medium term
will lead to tax increases, by increasing the contribution
base, the tax rates or by reducing the tax benefits. This will
most certainly have a direct impact on M&A activity.
In the financial system, the implementation of legislation
regarding financial sector taxation may have an adverse impact
on bank operating results. Despite the fact that this measure
was not included in the 2016 and 2017 budgets, the 2013 to 2015
budgets included rules allowing the government to create a
stamp duty on financial transactions. However, at this date tax
over financial transactions was yet to be implemented.
The new insurance companies' solvency regime is also
uncertain and may negatively impact the activity of financial
institutions and consequently, M&A volume.
3.3 Are there any rules, legislation or policy frameworks
under discussion that may impact M&A in your jurisdiction
in the near future?
The legal initiatives regarding the tax regime, as well as
the adoption of ECB guidelines and supervision measures they
foresee, may have a negative impact in business. In this
regard, we would like to highlight the obligations resulting
from the budgetary balances of the member states that must
fulfill specific medium term objectives determined by the
Stability and Growth Pact and that are annually monitored
within the cycle of economic policy supervision and guidance
(The European Semester). Considering current Portuguese public
debt, these measures will most certainly have a long term
impact on the government's economic stimulus policies, such as
increasing public investment or reducing the tax burden.
SECTION 4: Market idiosyncrasies
4.1 Please describe any common mistakes or misconceptions
that exist about the M&A market in your jurisdiction.
There is a lot of information regarding the Portuguese
M&A market. This is a market that can be considered as
mature, with clear and transparent procedures that are
thoroughly supervised. With this level of information it is not
normal that errors of assessment or of conception, or of any
other type regarding the Portuguese M&A market, appear.
Furthermore, the recent presence of the Troika as kept the
country under the spotlights implying a thorough analysis over
its rules, practices, procedures and principal players. As a
result, Portugal is a M&A market easy to be acquainted
4.2 Are there frequently asked questions or often
overlooked areas from parties involved in an M&A
There is a tendency to consider planning as a predominant
factor. The due diligence phase is considered as the starting
point for a transaction. This phase is centered on
financial and legal issues that may affect the transaction and
it will also impact the price of the transaction.
Multidisciplinary teams will conduct this phase and will also
act in strategic questions such as human resources evaluation,
marketing or client base.
M&A is still the main growing tool adopted by companies,
to enter into new markets or defend themselves from hostile
moves by competitors. Despite the different motivations, the
common goal is to maximize assets and avoid loss.
4.3 What measures should be taken to best prepare for your
We believe that the best measure any investor can take
before entering the Portuguese market is to get legal and
financial advice and to gather the maximum information
regarding the economic, financial, political, labour and tax
environment. The legal advice on the M&A structure is
mandatory in our opinion.
SECTION 5(a): Public M&A
5.1 What are the key factors involved in obtaining control
of a public company in your jurisdiction?
Control of a public company is regulated by the Portuguese
Securities Code. However, the Portuguese Securities and
Exchange Commission (CMVM) sets forth important regulations
relating to public companies and there is additional
legislation which imposes reporting obligations on the
acquisition of holdings in public companies in general.
In Portugal, obtaining control of a public company is
usually voluntary, nevertheless in some cases it could be
5.2 What conditions are usually attached to a public
As a rule the conditions regarding the prospectus of a
public takeover offer are the following: presenting the main
warnings regarding the characteristics of the operation and the
effects of the registration; identifying the responsible party
for the information provided in the prospectus; description of
the offer, amount, nature and category of the securities that
are the object of the offer; consideration offered and the
justification thereto, as well as form of payment; security
deposit or guarantees offered of the price; type of offer;
assistance; purpose of the purchase; acceptance statements;
offer result; information regarding the offeror, shares and
agreement; identification of the offeror; attribution of voting
rights; shares of the targeted company owned by the offeror;
voting rights and shares of the offeror owned by the targeted
company; agreements entered into with members of the corporate
bodies of the targeted company; and representatives for
relations with the market.
5.3 What are the current trends/market standards for break
fees in public M&A in your jurisdiction?
There is no specific fee determined by the law for breach of
the rules for launching a public offer. However, it has as
necessary and ipso jure (independently of judicial or
regulatory decision) effect: prohibition of the exercise of
voting rights; and regarding the payment of dividends in
respect of the shares that will exceed the limit over which the
public offer should have been launched. This sanction envisages
forcing the wrongdoer to abide by the law and to protect the
market, the company and the minority shareholders. Civil
liability towards the owners of shares that should have been
subject to a public offer is also a protective measure
defending minority shareholders' interests.
SECTION 5(b): Private M&A
5.4 What are the current trends with regards to
consideration mechanisms including the use of locked box
mechanisms, completion accounts, earn-outs and escrow?
Locked box, completion accounts, earn-outs and escrow are
common to the Portuguese market. Conventional completion
accounts allow the purchase price to be adjusted (upwards or
downwards) if the financial position of the target company or
business at completion differs from the assumed position. When
a completion accounts mechanism is used, the buyer will pay for
the actual level of assets and liabilities of the target as at
completion in accordance with a post-completion pricing
In contrast, a locked box mechanism involves the parties
agreeing a fixed equity price calculated using a recent
historical balance sheet of the target prepared before the date
of signing of the sale and purchase agreement. Cash, debt and
working capital as at the date of the locked box reference
accounts are therefore known by the parties at the time of
signing and there is no post-completion adjustment. The
economic risk and benefits of the business pass to the buyer
from the date of the locked box reference accounts.
5.5 What conditions are usually attached to a private
Gathering information as to the legal and tax implications
in the origin country of purchasing, detaining, encumbering or
selling the shares of the target company is an essential
condition investors in any private M&A transaction should
meet. Any decision should be based on the information gathered
following independent appraisal of the economic and financial
situation or of any other relevant aspect of the targeted
company. No decision should be taken without previous analysis
by the potential investor and its consultants of the situation
of the targeted company. This should include the analysis under
the legislation applicable to companies' governance, the
securities legal regime, labour law, tax law and activity
related laws and regulations.
5.6 Is it common practice to provide for a foreign
governing law and/or jurisdiction in private M&A share
It is common practice to choose foreign governing law and/or
jurisdiction in private M&A share purchase agreements
5.7 How common is warranty and indemnity insurance on
private M&A transactions?
The negotiation of guarantee clauses or civil liability
insurance to assure the breach of any representation or
warranty made by the seller in the SPA is not very common to
the Portuguese market. However, it is becoming more common,
especially in bigger operations or in operations involving
foreign entities. We believe this is a result of the offer by
the Portuguese insurance market and of the lack of knowledge by
some of the investors that such a mechanism may work in benefit
of the seller when determining the price.
SECTION 6: Outlook 2017
6.1 What are your predictions for the next 12 months in the
M&A market and how do you expect legal practice to
2016 was a year in which Portugal followed the global trend
of increasing M&A. Despite the economic and financial
downturn, in this first quarter we expect that 2017 will be
similar to 2016 regarding the number of transactions. We
believe that the main players will still be foreign companies
(inbound transactions). In what concerns outbound transactions,
we do not foresee any change in the most recent trend
– moderate acquisitions in markets such as Spain,
Brazil and France. The more active sectors will be the
financial, real estate, tourism and TMT (technology, media and
Nelson Raposo Bernardo
Managing partner, Raposo Bernardo
T: 351 21 312 1330
F: 351 21 356 2908
Nelson Raposo Bernardo is the founder and global
managing partner of Raposo Bernardo.
His reference practice areas are corporate law,
mergers and acquisitions, banking and finance, capital
markets, project finance and private equity.
He advises national and multinational leading
players, in operations concerning M&A, debt,
equity, structured finance and securitisation, project
finance, private equity, restructuring and
He has published books and articles on corporate
law, banking and contract law, and participated as a
speaker seminars and conferences in Portugal and
He is also strongly experienced in drafting
legislation packages, being co-author of the present
Portuguese Securities Code, and led several legislative
reform committees in several countries in the banking,
financial, real estate and construction areas. He was a
member of the higher commission for the approval of
ad-hoc judges (2000) and consultant for capital markets
to the Portuguese Auditors Association (1998-2006).
He holds a degree in law and a masters in juridical
sciences (corporate law) (1998) from the University of
Lisbon Law School. He was assistant professor of
corporate and commercial law at the University of the
Lisbon Law School (1991-2006) and in entrepreneurship
courses at INDEG/ISCTE (Audax) (2005-present).
He is fluent in Portuguese, English, French and
Joana Andrade Correia
Partner, Raposo Bernardo
T: 351 21 312 1330
F: 351 21 356 2908
Joana Andrade Correia co-heads Raposo Bernardo's
corporate and M&A department.
For over ten years, she has dedicated her work to
this area, building a solid experience and notable
Throughout her career she gained an extensive
experience in advising relevant domestic and
international operations. Her activity concentrates in
corporate advisory, mergers and acquisitions and
project finance for companies acting in different
sectors such as pharmaceutical, banking and finance,
tourism and energy, among others.
Andrade Correia was also part of the teams drafting
legislation packages for different countries by the
request of local governments and the World Bank.
She holds a degree in law from the University of
Lisbon Law School and a post-graduate degree in
business and corporate law (from Catholic University of
Lisbon), in legistics (from the University of Lisbon
Law School) and in tourism law (from Estoril Tourism
She is fluent in Portuguese, Spanish, French and
Manuel Esteves de Albuquerque
Partner, Raposo Bernardo
T: 351 21 312 1330
F: 351 21 356 2908
Manuel Esteves de Albuquerque has over 20 years of
experience in the areas of corporate, contracts and
real estate, alongside the coordination and development
of international business projects, as well as advising
in cross-border operations.
After finishing his law degree in 1988 in the
University of the Lisbon Law School, he held management
and legal positions in FMCG (Fast Moving Consumer
During this period and in his activity as a lawyer
he became highly experienced in corporate law
– general corporate advisory, M&A and in
commercial agreements across a wide range of
De Albuquerque has advised on many investment
projects and in M&A operations in Portugal and
abroad. He is fluent in Portuguese, English, French and