When considering the structuring of an acquisition, one of the principal decisions to be made is how to most efficiently finance the purchase. The buyer needs to strike a balance – the financing should be cost-efficient as it affects the cost of the acquisition generally (in a bid scenario, cost-efficient financing may give the buyer a competitive advantage in the purchase price negotiations), while at the same time, it should also be non-restrictive to allow the buyer the necessary freedom to manage and expand the acquired business after closing. Although the financing is obtained by the buyer, the seller is also interested in ensuring that the buyer has locked in the financing to be able to pay the purchase price at closing.
In this chapter, we will discuss some of the most common considerations for acquisition financing in Latin America, as well as related trends, practices and challenges, focusing primarily on the six largest economies in Latin America – Argentina, Brazil, Chile, Colombia, Mexico and Peru – from a New York perspective. The first section provides a market overview of acquisition finance in Latin America for 2021 and the first half of 2022, and some of the current trends. The second section examines matters to be considered when structuring an acquisition financing. Sections three and four outline certain noteworthy provisions typically included in the loan and acquisition documentation. The final section highlights certain Latin America-specific considerations in debt financing transactions.
