Mergers & Acquisitions in Colombia

Business mergers and acquisitions in Colombia happen almost every day. The Colombian business landscape has seen considerable change in recent years. For example, 2020 featured 152 mergers and acquisitions, with a total deal value of USD 4.75 billion. This was a steep decline from 2019, with a 34% higher number of M&A transactions and a 61% higher reported deal value. That might paint a grim picture for some, but the fact is that many transactions in 2020 were deferred due to the Covid-19 pandemic.

As the year wore on and business resumed, these deferred transactions were reactivated and processed, with a turnaround coming in the last quarter of 2020. This turnaround bodes well for business interests in 2024; if current trends are any indication, this year should far outshine 2019 and 2020 in terms of business activity.

For those of you who may be interested in the legislature surrounding M&A transactions in Colombia, today we’ll be taking a closer look at these legalities and discussing the laws. In addition, the business environment and other aspects that you’d need to be acquainted with when assessing a potential opportunity in Colombia will also be discussed here.

The Laws that Govern Mergers and Acquisitions

There is no single code or set of rules governing mergers and acquisitions in Colombia. Different laws apply depending on the nature of the target company and the nature of the transaction undertaken or proposed. Some of these laws include:

Commercial Code Law 222 of 1995 and Law 1258 of 2008, which outline corporate rules and regulations during a merger or acquisition

Law 795 of 2003 (the Financial Statute) and Decree 2555 of 2010 govern the mergers and acquisitions of financial institutions, such as insurance companies, banks, and brokerage houses.

Law 964 of 2005 and Decree 2555 of 2010 outline the rules surrounding a transaction where the acquired company is publicly traded.

Law 1340 of 2009 and Resolution No. 77896 of 2020 issued by the Superintendence of Industry and Commerce, which outlines the merger control regime, and the rules and practices for the audit of mergers and acquisitions, ensuring that no anti-competitive or antitrust violations are in play.

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Regulatory Bodies

From a legal perspective, certain regulatory bodies must oversee the books, operations, holdings, etc., of corporations to ensure that practices on the ground are being carried out following the legislature. These include:

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Superintendencia Financiera or the Superintendence of Finance undertakes the surveillance of insurance companies, banks, brokerage houses, and other financial institutions and authorizes transactions involving publicly traded companies.

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Superintendencia de Sociedades or the Superintendence of Companies, which undertakes the surveillance of all companies with a focus on corporate practices.

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Superintendencia de Industria y Comercio or the Superintendence of Industry and Commerce, which ensures compliance with the merger control regime, monitors for antitrust violations.

Seeking Information Regarding Mergers and Acquistions

Depending on the sector and jurisdiction a company is active in, different amounts of information may be made available to an acquirer that expresses interest in a particular target company. In particular, when relating to publicly traded companies, detailed information regarding the company’s finances will be a matter of public record. For private companies, basic corporate information, including majority shareholders, company structure, and other details, may be publicly available or made available on request.

Publicly Traded Companies

Most M&A transactions in Colombia pertain to private companies. Still, an acquisition of a publicly traded company may also be initiated by an acquirer. The most common way to acquire a large portion of shares in a publicly traded company is via a public tender offer. The tender offer will be directed towards all shareholders in the said company if an acquirer executes their intent to acquire a 25% or a more significant percentage of the voting shares or they are already in possession of 25% of the voting shares. In addition, they express the intention to increase their holdings by 5% or more.

Third-party actors may attempt to interfere with a public tender offer and file competing bids.

Disclosure and Notice

When acquiring a publicly-traded company, details of the transaction are typically disclosed to the public upon execution of the purchase agreement. In private companies, details regarding due diligence and negotiations are usually not open to the public and are conducted without announcement. Rules for disclosure in these cases are generally formulated as part of the details of the transaction.

If shares do change hands, an acquirer may notify one of the above-stated regulatory authorities or others. However, when it comes to privately held companies, the acquisition or disposal of a controlling majority stake (50% or more of the total voting shares) must be reported to the Chamber of Commerce within 30 days of the stake changing hands.

When acquiring 10 percent or more of the shares in a publicly listed company or a financial institution, the acquiring party must notify the issuer of said shares, as well as the Superintendence of Finance and the Colombian stock exchange.

International Interests

When dealing with transactions between Colombian entities, Colombian law governs all transactions. New York Law is customarily applied if foreign interest is involved, though this depends upon what both parties agree upon. In these cases, an international arbitration tribunal is also often included to protect the application of New York Law in the event of a claim.