Recent Developments in Brazilian Merger Control: The Case of Private Equity Funds

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Jun 13, 2009

In spite of the worldwide financial crisis, the industry of private equity funds in Brazil is experiencing a vigorous moment. According to the Brazilian National Association of Investment Banks, there are more than eight thousand private equity funds in operation, administering over five hundred billions of dollars invested in numerous sectors of the economy. As a result, Brazilian Competition authorities are being challenged with legal and economic questions regarding the analysis of potential anticompetitive effects arising out of transactions involving such funds… The first set of questions that the BCPS has to face in connection with transactions involving private equity funds derives from the interpretation of the “economic group” concept. Do the actual investors those who have invested their resources in the funds constitute an “economic group” among themselves? If so, should the gross revenue criteria be applied to their income? What if the fund is opened to the market; that is, any person or legal entity can put their money into that fund? And what if the investors are, actually, entities that do not carry out business activities, such as pension funds, or even individuals? On the other hand, do the investors and the targeted companies (those in which the administrator of the fund decided to inject the resources) constitute an economic group among themselves? The answers to these questions are not trivial.