M&A IN LATIN AMERICA
legal expertise with technological innovation, risk management strategies, and a commitment to upholding ethical standards and regulatory compliance.
M&A transactions in Colombia M&A transactions in Colombia have evolved in line with the American and British legal cultures of common law and the structure, clauses, and agreements were all originally adapted from these jurisdictions. Initially, conflict resolution clauses aimed to address disputes in ICC, Texas, and New York courts, as well as in Paris Courts, among others, based on their specialization. Currently, the agreements feature conflict resolution clauses that specify the Colombian arbitration processes as the preferred jurisdiction for resolving disputes, as judges have incorporated American and European legal precedents to adjudicate local disputes. Labour, tax, environmental, and anti-money laundering/ financing of terror (ML/FT) are the four workstreams of a typical transaction, but considering its legal, economic, and operational impact, AML/FT is the area which requires most focus. This is not least due to the significant fines imposed by the Superintendence of Companies during 2023 as a result of non-compliance with companies’ AML policies. In labour matters, it is crucial for employers to conduct an in- depth review of the nature of employment relationships and the implementation of labour rights, including inclusivity initiatives. On the taxation front, the tax authorities use technology to track every transaction, and any errors in tax returns are penalized. Environmental obligations have not been met by some company administrators, also resulting in hefty fines. Environmental violations have a statute of limitations of 20 years, and some are considered criminal acts by administrators, boards of directors, and shareholders. AML/FT has emerged as the fastest-growing area within companies due to significant penalties for non-compliance. Argentina, Colombia, and Peru have all implemented robust AML/FT programs (SAGRILAFT, SIPLAFT, SARLAFT, and PTEE). Colombia’s OECD membership mandates AML programs, making assessment of this area a primary focus in M&A due diligence.
Fig 1 Ranking transactions by country (Source TTR Data)
In addition to global economic challenges, a new opportunity/ threat has emerged: that new technologies will oblige M&A advisors to raise their levels of creativity and professionalism. M&A transactions are by nature complex and multi- dimensional. Firstly, the legal design of M&A agreements brings various complexities, including the drafting of intricate clauses, navigating regulatory frameworks, and ensuring compliance with both local and international laws. In this context, ensuring clarity and precision in the legal language becomes paramount to avoid ambiguities and potential disputes down the line. Secondly, the increased use of AI technologies in M&A transactions introduces another set of challenges. While AI can streamline due diligence processes, enhance contract analysis, and identify potential risks, its adoption requires careful consideration of potential data privacy and security concerns. Ensuring the accuracy and reliability of AI algorithms is crucial to prevent erroneous conclusions or misinterpretations of legal documents, which could have significant implications for the success of M&A transactions. Additionally, the rapid evolution of AI technologies demands ongoing monitoring and adaptation to keep pace with changing legal landscapes and emerging regulatory requirements. This requires investment in the training of personnel and implementation of robust governance frameworks to mitigate the risks associated with AI-driven decision-making in M&A transactions. Overall, addressing the challenges posed by legal design and AI in M&A transactions requires a holistic approach that combines
Lastly, Human Rights and Environmental, Social, and
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IMGL MAGAZINE | APRIL 2024
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