M&A Highlights

Excerpts from recent issue of Venture Equity Latin America
Published by WorldTrade Executive, Inc.

Brazil M&A Activity Falls 11 Percent in 2008
PricewaterhouseCoopers
In 2008, Brazil registered 639 mergers and acquisitions, down 11 percent from 2007, analyst PricewaterhouseCoopers said in its latest report on the sector. But it said that M&A was still 12 percent above the level in 2006, which indicated a certain maturing in the sector.

Mexico: M&A Roundup 2008
By Merger Market
With nearly 90 deals in 2007 for a value of $27.2bn, the market slowed down in 2008, with only 56 announced deals and a total value of approximately $7.3bn. These figures represented a drop of 37% in deal activity and a 73% decline by overall deal values.

LBO No Longer an Option in Brazil
By Elizabeth Johnson
With the international credit crisis, the brief window during which private equity funds had the option to do leverage buyouts has closed.
With credit market tight, maturities down and borrowing costs on the rise, private equity funds expect acquisition structures to change.
However, there is a consensus that it is a positive moment for funds, especially those that raised capital in 2008.

Hotel Fund of Brazil’s GP Investimentos Buys Invest Tur
LA Hotels LLC, the hotel arm of Latin America’s leading private equity fund GP Investmentos, bought control of troubled Brazilian tourism company Invest Tur, which raised R$945 million on the local São Paulo Stock Exchange in July 2007. The company still has 490 million in cash, of which R$300 million would be returned to investors if LA Hotels closes the deal.

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Is Your Employee Leasing Company at Risk in Mexico?

Excerpt from Mexico Tax, Law and Business Briefing: 2009 by Esteban G. Dalehite, Ph.D.



Recent developments suggest that Mexico’s Federal Government is taking a tougher stance regarding employee leasing companies, a common component of the corporate and tax strategy used by multinational firms doing business in Mexico. In April 2008, Mexico’s House of Representatives approved a bill amending the Social Security Act (Ley del Seguro Social) which places controls on employee leasing. However, this bill is still under discussion in the Senate where it has developed opposition and has not yet been approved. In June 2008, Mexico’s Tax Administration Service (known for its Mexican acronym SAT) announced a joint auditing program with the Mexican Institute of Social Security (known for its Mexican acronym IMSS) and the Institute of the National Worker Housing Fund (known for its Mexican acronym INFONAVIT) to combat tax evasion through employee leasing companies with an initial target of 455 firms.In October 2008, the SAT announced an information exchange agreement with the Mexican Department of Labor and other agencies for the same purpose, and the House of Representatives hosted a congressional hearing where the General Director for the IMSS was repeatedly questioned about tax evasion through employee leasing companies. Finally, in December 2008, the SAT again announced that, at its request, an arrest warrant had been issued against a tax consultant which, according to the SAT, had pioneered aggressive tax schemes in the area of employee leasing.


Given the extent of employee outsourcing strategies implemented by multi-national firms in Mexico, this recent string of developments raises concern and questions about the scope of the Mexican Government’s program, its definition of the line between tax evasion, avoidance and planning in this area, and the legal powers that it may have to combat what it perceives as evasion through employee leasing.



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