1. Relevant Authorities and Legislation
1.1 What regulates M&A?
M&A transactions in Argentina are primarily regulated by the General Companies Law No. 19,550 (as amended, “GCL”) and the Civil and Commercial Code (as amended, “CCC”), which sets forth general rules applicable to all types of companies, including those relating to M&A, and other forms of corporate reorganisations. The Argentine Securities Commission (“CNV”) also regulates M&A transactions involving listed companies, while antitrust matters are governed by Law No. 25,156 (as amended, “Antitrust Law”). Other regulatory bodies, such as the Central Bank of Argentina, may intervene in specific cases, like when the transaction involves financial institutions or regulated industries. Additionally, specific regulations may apply depending on the industry involved (e.g., telecommunications, energy, and banking).
The Argentine capital market is relatively small, lacks sufficient depth, has limited liquidity, and is subject to regulations that still need to be modernised to meet international standards. In addition, most public companies only have a minority portion of their capital floating in the capital markets (between 10% and 30%). Therefore, public M&A transactions are not common. Furthermore, even though hostile takeovers are legal, we have not seen any in Argentina.
Most M&A activity is conducted through private deals. These may involve shares, assets, or a combination of both. Share deals are preferred to asset deals and are undertaken through stock purchase agreements that generally follow international standards for private transactions. These agreements can be subject to foreign law and jurisdiction, including foreign arbitration tribunals. This is generally the case in transactions for high-end Argentine companies. However, there are some aspects that will necessarily depend on, and be governed by, Argentine laws (for example, matters relating to the completion of transactions, certain matters covered by local securities regulations, labour laws, and regulatory requirements).
1.2 Are there different rules for different types of company?
Generally, the same rules apply regardless of the type of company involved (corporation, limited liability company, etc.). However, listed companies are subject to additional regulations by the CNV, and financial institutions are regulated by the Central Bank of Argentina. Furthermore, companies operating in specific sectors (e.g., telecommunications, energy, and banking) may also be subject to additional rules and regulations.
1.3 Are there special rules for foreign buyers?
Argentina’s constitution and laws grant equal rights to local and foreign investors, and foreign investment is not generally subject to prior approval by the authorities. Argentina has entered into bilateral investment protection treaties with several countries, further providing for the protection of foreign investments.
Generally, foreign investors who want to invest in Argentina, either by starting up new businesses or acquiring existing businesses or companies, do not require prior government approval except in regulated industries or under general rules such as antitrust regulations. However, if a foreign company’s investment will imply holding equity in an Argentine company, the foreign company must register in the Public Registry of Commerce of the jurisdiction where the Argentine company is incorporated and must comply with certain periodic reporting requirements.
In addition, depending on the industry in which the target company operates, whether private or publicly owned, certain specific administrative regulations may apply. Some of these regulated business sectors include: (i) oil and gas; (ii) energy; (iii) media and broadcasting; (iv) renewable energies; and (v) transport. Regulations frequently require prior government authorisation for a transfer of shares or merger, especially if the transaction would result in a change of control. There are several regimes that regulate or limit foreign ownership of certain assets, including rural land and real estate property located in frontier zones (it is noticeable that the rural land regime for foreign acquisition has been preliminarily derogated by way of a presidential decree).
1.4 Are there any special sector-related rules?
Yes, certain sectors are subject to specific regulations that may affect M&A transactions. For instance, in the broadcasting, energy, and banking sectors, prior regulatory approvals may be required for certain transactions.
1.5 What are the principal sources of liability?
The principal sources of liability in M&A transactions include:
Breach of contract: Failure to comply with the terms of the purchase agreement or other transaction documents can result in contractual liability.
Misrepresentation: Providing false or misleading information during the due diligence process or negotiations can give rise to liability for misrepresentation.
Breach of fiduciary duties: Directors and officers of the target company owe fiduciary duties to the company and its shareholders. A breach of these duties can result in liability.
Antitrust violations: M&A transactions that result in a concentration of market power may violate antitrust laws and result in liability.
Environmental liability: Buyers may be liable for environmental contamination on the acquired property.
Labour and employment liability: Buyers may be liable for labour and employment claims arising from the target company’s operations.
Tax liability: M&A transactions can trigger tax liabilities for both the buyer and the seller.
2. Mechanics of Acquisition
2.1 What alternative means of acquisition are there?
The most common means of acquisition in Argentina are:
Share purchase: The buyer acquires the shares of the target company from its shareholders. In Argentina, most transactions are structured as share purchases.
Asset purchase: The buyer acquires specific assets and liabilities of the target company.
Merger: The target company is absorbed by the buyer or a new company is created to combine the operations of both companies.
2.2 What advisers do the parties need?
The parties typically engage various advisors in M&A transactions, including:
Legal counsel: Provide legal advice on the transaction structure, due diligence, documentation, and regulatory compliance.
Financial advisors: Provide financial analysis, valuation, and transaction structuring advice.
Accountants: Conduct financial due diligence and provide accounting/tax advice.
Other advisors: Depending on the specific transaction, other advisors may be engaged, such as environmental consultants, human resources consultants, and industry experts.
2.3 How long does it take?
The timeframe for completing an M&A transaction in Argentina can vary depending on several factors, such as the complexity of the transaction, the level of regulatory scrutiny, and the willingness of the parties to negotiate. However, it typically takes several months to complete a transaction.
2.4 What are the main hurdles?
The main hurdles in M&A transactions in Argentina include:
Regulatory approvals: Obtaining regulatory approvals can be time-consuming and complex, particularly in regulated industries.
Due diligence: Conducting due diligence can be challenging, especially in cases where the target company has poor record-keeping or operates in a complex regulatory environment.
Negotiations: Negotiating the terms of the transaction can be difficult, especially if there are significant differences in valuation or other key issues.
Financing: Securing financing for the transaction can be a challenge, especially in times of economic uncertainty and/or foreign exchange restrictions.
2.5 How much flexibility is there over deal terms and price?
The parties have significant flexibility to negotiate the terms and price of an M&A transaction in Argentina. However, certain terms may be regulated by law or subject to regulatory approval. For example, in transactions involving listed companies, local laws include regulations regarding the consideration payable in tender offers and the acquisition process is subject to CNV control.
2.6 What differences are there between offering cash and other consideration?
Offering cash is the most common form of consideration in M&A transactions in Argentina. However, other forms of consideration, such as shares in the buyer company, may also be used.
2.7 Do the same terms have to be offered to all shareholders?
Generally, the same terms must be offered to all shareholders of the same class in an M&A transaction. However, in certain circumstances, different terms may be offered to different groups of shareholders, provided that the differential treatment is fair and reasonable.
2.8 Are there obligations to purchase other classes of target securities?
Listed companies are subject to a mandatory tender offer regime in the case of an acquisition of a significant interest or control. This process is subject to control of the CNV.
2.9 Are there any limits on agreeing terms with employees?
Agreements with employees are subject to local labour law. Argentine labour regulations cannot be modified to the detriment of employees’ interest.
2.10 What role do employees, pension trustees and other stakeholders play?
Employees do not usually hold equity in companies, and their consent is not required to consummate acquisitions. However, labour matters may be relevant (for example, in a merger context, negotiations with union and employees may be required to unify employment conditions). Pension trustees do not play a significant role in M&A transactions (in Argentine law, pension funds have been nationalised and are held and managed by the National Government). The role of other stakeholders may be highly relevant in acquisitions depending on the particular conditions of each transaction.
2.11 What documentation is needed?
The documentation needed in an M&A transaction will vary depending on the structure and complexity of the deal. However, some of the key documents that are typically required include:
Confidentiality agreements: These agreements are used to protect confidential information that is shared between the parties during the due diligence process.
Letters of intent (LOIs): LOIs are non-binding agreements that outline the key terms of the transaction.
Due diligence reports: These reports contain the findings of the due diligence investigation.
Purchase agreements: This is the main contract that governs the transaction. It sets out the terms and conditions of the sale, including the purchase price, the closing date, and the representations and warranties of the parties.
Closing documents: These documents are executed at closing and include the transfer of ownership documents, such as share transfers and corporate minutes relevant for the consummation of the transaction.
2.12 Are there any special disclosure requirements?
Yes, there are special disclosure requirements in M&A transactions, particularly when the target company is a listed company. Additionally, there may be disclosure requirements related to antitrust.
2.13 What are the key costs?
The key costs in an M&A transaction include:
Legal fees: These fees are paid to the legal counsel of the buyer and the seller.
Financial advisor fees: These fees are paid to the financial advisors of the buyer and the seller.
Accountant fees: These fees are paid to the accountants who conduct due diligence and provide accounting/tax advice.
Other advisor fees: These fees are paid to other advisors, such as environmental consultants and human resources consultants.
Capital gains tax: This tax may be payable by the seller on the sale of shares or assets.
2.14 What consents are needed?
The consents that are needed in an M&A transaction will depend on the structure of the transaction and the nature of the target company’s business. However, some of the common consents that may be required include:
Shareholder approval: In some cases, the approval of the target company’s shareholders may be required.
Regulatory approval: Regulatory approval may be required from antitrust authorities or sector-specific regulators.
Third-party consents: Third-party consents may be required from creditors, landlords, or other parties who have a contractual relationship with the target company.
2.15 What levels of approval or acceptance are needed to obtain control?
The level of approval or acceptance that is needed to obtain control of a target company will depend on the structure of the transaction. In a share purchase, the buyer will typically need to acquire a majority of the target company’s shares to obtain control. In a merger, the approval of the target company’s shareholders may be required.
2.16 When does cash consideration need to be committed and available?
The timing of the commitment and availability of cash consideration will depend on the terms of the transaction. In some cases, the buyer may be required to provide a guarantee of funds at the time of signing the purchase agreement. In other cases, the cash consideration may only need to be available at closing. Additionally, it is not uncommon to see sellers’ financing in local acquisitions.
3. Friendly or Hostile
3.1 Is there a choice?
Hostile bids are legal. They are not common because most public companies have a minority proportion of their capital floating on the capital markets (between 10 and 30%) and the balance is controlled by one shareholder. Friendly and hostile takeovers in listed companies are regulated and subject to CNV supervision and control.
3.2 Are there rules about an approach to the target?
Yes, there are rules about how a buyer can approach a target company. In a friendly takeover, the buyer will typically approach the target company’s shareholders with a proposal. In a hostile takeover, the buyer may make an offer directly to the target company’s shareholder. Takeovers in listed companies are regulated by the CNV.
3.3 How relevant is the target board?
The target company’s board of directors plays a crucial role in listed M&A transactions. In closed companies, the target board’s relevance is limited.
3.4 Does the choice affect process?
Yes, the choice between a friendly or hostile takeover can significantly affect the transaction process. A friendly takeover is typically less time-consuming and complex than a hostile takeover.
4. Information
4.1 What information is available to a buyer?
The information available to a buyer in an M&A transaction will depend on the stage of the transaction and the willingness of the target company to share information. During the due diligence process, the buyer will typically have access to a wide range of information about the target company, including financial statements, contracts, and regulatory filings.
4.2 Is negotiation confidential and is access restricted?
Yes, negotiations in M&A transactions are typically confidential, and access to information is restricted to the parties and their advisors. Confidentiality agreements are often used to protect sensitive information.
4.3 When is an announcement required and what will become public?
The timing of announcements in M&A transactions will depend on the specific circumstances and regulatory requirements. To the extent that listed companies are involved in a transaction, the parties will be subject to market reporting obligations.
4.4 What if the information is wrong or changes?
If the information that is provided to the buyer is wrong or changes, it may give rise to a claim for misrepresentation. The buyer may be able to terminate the contract or seek damages if it can show that it relied on the false information.
5. Stakebuilding
5.1 Can shares be bought outside the offer process?
Yes, shares in a target company can be bought outside the offer process, subject to certain restrictions. For example, there may be restrictions on the number of shares that can be acquired without triggering a mandatory offer.
5.2 Can derivatives be bought outside the offer process?
Yes, derivatives can be bought outside the offer process, subject to certain restrictions.
5.3 What are the disclosure triggers for shares and derivatives stakebuilding before the offer and during the offer period?
The disclosure triggers for shares and derivatives stakebuilding will vary depending on the applicable regulations. In Argentina, there are disclosure requirements for shareholders who acquire a certain percentage of a listed company’s shares.
5.4 What are the limitations and consequences?
There may be limitations on the number of shares or derivatives that can be acquired without triggering a mandatory offer or other regulatory consequences. If a shareholder exceeds these limits, they may be required to make a mandatory offer to all shareholders or face other penalties.
6. Deal Protection
6.1 Are break fees available?
Yes, break fees are available in Argentina to the extent negotiated between the respective parties.
6.2 Can the target agree not to shop the company or its assets?
Yes, the target company can agree not to shop the company or its assets for a certain period of time.
6.3 Can the target agree to issue shares or sell assets?
Yes, the target company can agree to issue shares or sell assets. However, the issuance of shares requires shareholder approval of the target company.
6.4 What commitments are available to tie up a deal?
There are a variety of commitments that can be used to tie up a deal, such as exclusivity agreements, break fees, and “no-shop” clauses.
7. Bidder Protection
7.1 What deal conditions are permitted and is their invocation restricted?
A variety of deal conditions are permitted in Argentina, such as conditions precedent to closing, material adverse change clauses, and financing conditions. The invocation of these conditions may be restricted by the terms of the contract or by law.
7.2 What control does the bidder have over the target during the process?
The level of control that the bidder has over the target company during the transaction process will depend on the terms of the contract and the stage of the transaction.
7.3 When does control pass to the bidder?
Control typically passes to the bidder at closing, when the ownership of the target company’s shares or assets is transferred.
7.4 How can the bidder get 100% control?
There are three main forms of takeover bids in Argentina:
- a voluntary takeover bid, in which a bidder voluntarily makes an offer for voting securities issued by the target company (and securities issued by the company conferring the right to acquire voting securities of the target company);
- a mandatory takeover bid, which a bidder is required to make if the intention is to acquire a control participation in the public company; and
- a squeeze-out bid, in which a shareholder who already holds 95% of the voting securities can squeeze out the remaining holders of voting securities. This can be combined with a voluntary or mandatory takeover bid.
8. Target Defences
8.1 What can the target do to resist change of control?
Hostile takeovers are legal but do not take place in Argentina as only non-controlling equity participation is listed and the control is closely held by the controlling shareholder. In principle, a target company could employ various strategies to resist a change of control, although the effectiveness and permissibility of these defences may vary depending on the specific circumstances and applicable regulations:
Poison pills: These are shareholder rights plans that make the acquisition of the target company less attractive by diluting the bidder’s stake or increasing the cost of the acquisition.
Staggered boards: This involves staggering the election of board members so that not all directors are up for re-election at the same time, making it more difficult for a bidder to gain control of the board quickly.
White knight defence: The target company seeks a more favourable acquirer (“white knight”) to compete with the hostile bidder.
Golden parachutes: These are lucrative severance packages for top executives that are triggered in the event of a change of control, making the acquisition more expensive for the bidder.
8.2 Is it a fair fight?
While target companies have access to various defence mechanisms, the “fairness” of the fight in a hostile takeover can be debated. Regulations aim to strike a balance between protecting the interests of shareholders and allowing for legitimate takeover attempts. However, the specific dynamics of each situation will determine how “fair” the fight is. It should be noted, however, that hostile takeovers have not occurred in Argentina due to the reasons mentioned above.
9. Other Useful Facts
9.1 What are the major influences on the success of an acquisition?
Several factors can influence the success of an acquisition in Argentina, including:
Thorough due diligence: Identifying potential risks and liabilities early on is crucial for a successful transaction.
Strategic fit: Ensuring that the target company aligns with the buyer’s strategic goals and objectives.
Cultural compatibility: Addressing potential cultural differences between the two companies can help ensure a smooth integration process.
Regulatory compliance: Navigating the regulatory landscape and obtaining necessary approvals is essential.
Skilled advisors: Having experienced legal and financial advisors can help guide the parties through the complexities of the transaction.
9.2 What happens if it fails?
If an M&A transaction fails, several consequences may arise depending on the reasons for the failure and the terms of the agreement. These may include:
Termination of the agreement: The parties may terminate the purchase agreement, and the transaction will not proceed.
Break fees: If a break fee clause is included in the agreement, the target company may be required to pay a fee to the buyer for terminating the deal.
Litigation: Disputes may arise between the parties, leading to litigation and potential damages.
Reputational damage: A failed transaction can damage the reputation of both the buyer and the target company.
9.3 Is the use of special committees common and when are they relevant?
The use of special committees is not customary in Argentina. During the target’s due diligence process, limited committees are sometimes created to avoid the disclosure of sensitive information to certain key managers.
10. Updates
10.1 Please provide a summary of any relevant new law or practices in M&A in your jurisdiction.
The current status of the M&A market in Argentina is modest but it has picked up since Milei took office and fostered private investments and business. During the administration of Alberto Fernandez (2019–2023), foreign investment in Argentina had decreased because of a high level of state intervention in the economy, coupled with a shortage of foreign exchange.
The Milei administration has taken measures to foster private investment and has eased foreign exchange restrictions. Among others, the RIGI framework was enacted creating a regime of incentives for large-scale projects in certain sectors of the Argentine economy. Further, the Central Bank is reducing foreign exchange restrictions and the Milei administration has announced its intention to seek a free trade agreement with the United States and privatise certain government-owned companies.
Finally, there are certain factors that may positively impact the level of M&A activity in Argentina including:
The low price of the country’s assets compared with assets in similar countries in the region.
The restructuring of the sovereign and sub-sovereign debt.
The competitive advantages of certain local business sectors (for example, agribusiness, energy and natural resources, and technology).
The new measures that are being adopted by the Milei administration have already resulted in the ordering of the macroeconomy and a notable economic recovery is taking place. The local M&A scenario is more attractive and more transactions are taking place.
Production Editor's Note
This chapter has been written by a member of ICLG's international panel of experts, who has been exclusively appointed for this task as a leading professional in their field by Global Legal Group, ICLG's publisher. ICLG's in-house editorial team carefully reviews and edits each chapter, updated annually, and audits each one for originality, relevance and style, including anti-plagiarism and AI-detection tools. This chapter was copy-edited by Jenna Feasey, our in-house editor.
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