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?
M&A activity in 2017 was not as active as it was in
previous years. However, in 2018 we expect the level of M&A
activity in Panama to remain stable or increase in comparison
to last year's activity. Although there are no specific driving
factors behind an increase in M&A activity for the coming
year, it is certainly the case that Panama's economic growth
makes local companies more attractive targets. We expect for
most of the M&A activity to take place in the financial
industry (banks, investment advisors, and insurance companies)
and the energy industry (mostly power generation).
1.2 What M&A deal flow has your market experienced and
how does this compare to previous years?
The M&A deal flow during the last few years has remained
fairly constant with a slight decrease in 2017. We do not
expect major changes in 2018.
1.3 Is your market driven by private or public M&A
transactions, or both? What are the dynamics between the
There is no clear driver between private or public M&A,
and the balance can change from one year to the next depending
on specific deal flow for any given year.
1.4 Describe the relative influence of strategic and
financial investors on the M&A environment in your
We are seeing an increase in activity by financial investors
interested in the purchase of distressed companies or companies
in which they believe additional efficiencies can be obtained.
With respect to financial investors, we have mostly seen them
in the energy sector, but find that this trend has not
permeated to other sectors.
SECTION 2: M&A structures
2.1 Please review some recent notable M&A transactions
in your market and outline any interesting aspects in their
structures and what they mean for the market.
Among the most notable M&A transactions in Panama in
2017 was the sale of assets belonging to a company previously
owned by a person designated as a Specially Designated National
(SDN) by the Office of Foreign Assets Control of the US
Department of Treasury, which required the transfer of the
shares of the company to a trust structure for the benefit of
the group's creditors and structured through the National Bank
of Panama and eventually led to the sale of the assets of the
company in July 2017. The implementation of the trusts, and the
sale process, presented various complex situations above and
beyond a typical M&A transaction by having to tackle
various issues with creditors and local and foreign
2.2 What have been the most significant trends or factors
impacting deal structures?
Recently we have seen a number of financed transactions in
which the closing of the transaction is conditioned upon
obtaining the required financing. This has not been very
typical in Panama as we are used to seeing cash offers.
SECTION 3: Legislation and policy changes
3.1 Describe the key legislation and regulatory bodies that
govern M&A activity in your jurisdiction.
M&A transactions in Panama are undoubtedly impacted by
provisions of the Commercial Code, the Civil Code, and
depending on the nature of the target company, by the
Corporations Law, Limited Liability Company Law and
industry-specific regulations (banking, securities, mining,
energy, etc.). The primary regulator for M&A activity in
Panama will depend on the nature of the business undertaken by
the target company. So, for example, in the case of banks, the
primary regulator would be the Superintendence of Banks of
Panama, and in the case of broker dealers or investment
advisory firms, the primary regulator would be the
Superintendence of the Securities Market (formerly known as the
National Securities Commission). In all cases that may result
in an economic concentration, the antitrust authority (known as
Acodeco) could play an important role.
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?
There have been no recent changes to regulations or
regulators during 2017 that would specifically impact M&A
transactions or activity in 2018 and beyond, and none are
expected to be adopted.
3.3 Are there any rules, legislation or policy frameworks
under discussion that may impact M&A in your jurisdiction
in the near future?
To our knowledge, there are no rules,
legislation or policy framework under discussion that may
impact M&A in Panama in the near future, and none in
relation with most regulated industries (telecom, energy,
banking, securities, mining, among others).
SECTION 4: Market idiosyncrasies
4.1 Please describe any common mistakes or misconceptions
that exist about the M&A market in your jurisdiction.
The most common mistake or misconception is that there are
no economic concentration regulations in place in Panama that
need to be considered in an M&A transaction. In reality,
M&A transactions in Panama can be directly affected by Law
No. 45 of October 31 2007 (Consumer Protection and Competition
Defence Law), Executive Decree No. 8-A of January 22 2009,
which regulates Title I (Monopoly) and other dispositions of
Law No. 45 of October 31 2007 and Resolution No. A-31-09 of
July 16 2009, through which the Consumer Protection and
Competition Defence Authority (from here on, Acodeco) approves
the Guide for the Control of Economic Concentrations even
though these regulations do not establish a specific threshold
for review of particular transactions.
|NB: Values may exclude
certain transactions, for example asset
The types of transactions caught are all transactions that
fit into the economic concentration concept, as established by
Law No. 45 of 2007, which includes any merger, acquisition of
control or any other act by virtue of which corporations,
partnerships, associations, shares, social parties, trusts,
establishments, or assets in general are grouped together, that
takes place between suppliers or potential suppliers, customers
or potential customers and other competitors or potential
Certain sectors, such as energy, have specific
Internal restructurings or reorganisations are not included
in the concept of economic concentrations.
Prior notification of a potential economic concentration is
voluntary. If parties decide to voluntarily notify in advance,
they must do so before the merger has taken effect; that is,
before there has been a change in control. Parties typically
file prior notifications of an economic concentration when
there are circumstances surrounding the transaction (i.e.
market share) that increase the risk of an investigation by
Given that it is a voluntary prior notification, there is no
prohibition of closing before clearance, but the transaction
may be challenged by Acodeco or third parties within three
years if it is not cleared before it takes place. If the prior
notification is filed, Acodeco must review within 60 days of
the date in which the prior notification is filed or additional
information requested by Acodeco is provided. If the Acodeco
does not issue a response within that 60-day timeframe, the
concentration is deemed to be approved. If Acodeco reviews the
transaction directly, it has up to three years to complete its
review of the transaction. Acodeco will have the authority to
investigate and challenge economic concentrations which have
not submitted to prior verification, within a three-year period
from the date on which change of control occurred. Acodeco
would only have jurisdiction to review and impose penalties in
case there is an economic concentration in Panama.
4.2 Are there frequently asked questions or often
overlooked areas from parties involved in an M&A
Typical questions have to do with the filing of a prior
no-objection request from Consumer Protection and Competition
Defence Authority, and in the case of M&A transactions in
regulated industries like financial services (banking and
securities), questions dealing with the requirements and timing
for applicable prior authorizations.
4.3 What measures should be taken to best prepare for your
The most critical measure is making sure that enough time is
given for purposes of sufficiently documenting any regulatory
request for prior approval either from the Consumer Protection
and Competition Defence Authority, or the specific industry
regulatory body, and allowing sufficient time for the approvals
to be obtained prior to closing on the M&A transaction.
SECTION 5(a): Public M&A
5.1 What are the key factors involved in obtaining control
of a public company in your jurisdiction?
A takeover offer of a public company must be made to all of
the shareholders, with equal terms and conditions and the
purchase price must be paid to all shareholders who accept the
offer. If a bidder offers to purchase more than 25% of the
shares of a public company, or offers to purchase any number of
shares which, as a result of said purchase, would result in the
bidder owning more than 50% of the issued and outstanding
shares of the public company, the offer must be subject to the
public tender offer rules under the securities laws. If the
tender offer will result in the bidder owning more than 75% of
the issued and outstanding shares of the public company, the
offer must be made for all shares of the target which are not
owned by the bidder.
5.2 What conditions are usually attached to a public
In Panama, buyers can make conditional offers. However, in
the context of public tender offers, the securities law
requires committed funding and the posting of a guarantee (for
example cash or bond) to cover the tender offer.
5.3 What are the current trends/market standards for break
fees in public M&A in your jurisdiction?
There is no market standard. The parties in an M&A
transaction are free to agree to any preferred break fees, if
SECTION 5(b): Private M&A
5.4 What are the current trends with regard to
consideration mechanisms including the use of locked box
mechanisms, completion accounts, earn-outs and escrow?
In Panama, the use of escrows is perhaps the only current
trend with regard to consideration mechanisms. Locked box
mechanisms and completion accounts are not commonly used.
5.5 What conditions are usually attached to a private
There are no specific conditions, above and beyond the
standard, that are attached to a private takeover offer in
5.6 Is it common practice to provide for a foreign
governing law and/or jurisdiction in private M&A share
While valid and binding under Panama law, it is not common
practice to provide for a foreign governing law and/or
jurisdiction in private M&A share purchase agreements,
except from certain larger transaction involving a foreign
5.7 How common is warranty and indemnity insurance on
private M&A transactions?
Warranty and indemnity insurance on private M&A
transaction is not common in Panama.
5.8 Discuss the exit environment in your jurisdiction,
including the market for IPOs, trade sales and sales to
From a legal perspective, the exit environment is quite
flexible. Having said this, in practice, it is not common to
see exits in the form of IPOs, trade sales or sales to
financial sponsors. The typical exit strategy for financial
investors has been simple sale transactions. Given that the
growth of financial investors is fairly recent, we do not have
sufficient data to establish a trend with respect to exits for
strategic or financial investors.
SECTION 6: Outlook 2018
6.1 What are your predictions for the next 12 months in the
M&A market and how do you expect legal practice to
Our prediction is for the M&A market to remain stable
and even increase slightly as compared to last year. Panama's
economy is expected to continue to lead the region in growth,
and that should ultimately translate into continued M&A
Partner, Alemán Cordero Galindo
Panama City, Panama
T: +507 269 2620
F: +507 264 3692
Eloy Alfaro B joined Alemán Cordero Galindo
& Lee as an associate in 2004 and became a partner
in 2011. His professional practice concentrates on
banking, finance and capital markets, corporate and
M&A, public bids and concession contracts and real
estate law. Alfaro has been active in mergers and
acquisitions, assisting clients such as Citibank, the
Bank of Nova Scotia and BBVA in banking acquisitions,
mergers and dispositions in Panama, in addition to
assisting several other international banks and
companies in cross-border financing transactions.
Alfaro has also advised Panamanian and international
clients in important public bid projects.
Alfaro has a JD from the University of Pennsylvania
Law School and a bachelor of arts in political science
from Columbia University. He is a member of the
National Bar Association of Panama. He is fluent in
Spanish and English.
Rita de la Guardia
Associate, Alemán Cordero Galindo
Panama City, Panama
T: +507 269 2620
F: +507 264 3692
Rita de la Guardia joined Alemán Cordero
Galindo & Lee in 2014. Her professional practice
concentrates on banking, finance and capital markets,
corporate and M&A. De la Guardia has been active in
mergers and acquisitions, assisting clients such as
Citibank and Celsia. De la Guardia has a JD from
Cornell Law School and a bachelor of science in foreign
service from Georgetown University. She is a member of
the National Bar Association of Panama. She is fluent
in Spanish and English.