The view from New York – the growth in Iberian and Latin M&A

2006 has started as a promising and busy
year for transactional lawyers practicing
in the Iberian Peninsula and Latin
America. Not that 2005 was a bad year.
Quite the contrary. In 2005, Portugal,
Spain and Latin America consistently
made the international headlines with
major transactions.

Grenfel S. Calheiros y
Gonçalo C. Godinho, de
Simpson Thacher &
Bartlett LLP en Nueva
York, exponen que a
menudo infravaloramos
el impacto que tienen
las grandes operaciones
que se realizan en
España y Portugal y la
forma en que afectan a
Latinoamérica. Nueva
York se convierte en un
foco importante en
cuanto a muchas de
estas operaciones de
transnacional y utiliza
con frecuencia
neoyorquinos para
temas o aspectos
relacionados con los
EEUU. Esto conlleva un
incremento en la
demanda de personal
técnico í­bero y latino en
los grandes despachos
y bancos de inversiones
neoyorquinos debido a
su creciente actividad
en paí­ses de habla
hispana y portuguesa.

However we often overlook the extent
to which any major transactions in
Portugal or Spain, such as Sonae- Portugal
Telecom or Gas Natural-Endesa, have a
clear impact on, and are affected by,
events in Latin America. New York is also
important as many of these deals, by their
cross-border nature involve New York
firms to handle SEC or US-related aspects.

Although transactional seas were
relatively calm in Spanish speaking Latin
America in late 2004 and 2005, Brazil
experienced the beginning of a wave of
IPOs that still has the markets, bankers and
lawyers enjoying the high surf. Contrary
to initial expectations, the surge of IPOs
has continued despite the upcoming
presidential elections this November.

In 2005, the Brazilian Securities and
Exchange Commission registered 28
public equity offerings. Of these, a
significant number were combined with a
simultaneous international offering,
representing a total volume of
approximately US$5.1bn. This compared
to 21 representing approximately
US$4.3bn in 2004 and eight representing
approximately US$0.9 bn in 2003. In the
first two months of 2006, the Brazilian
SEC has already registered eight new
public equity offerings, representing
approximately US$1.4bn, and already has
21 additional offerings under review.

This is an exciting and revolutionary
development for Brazil as, for the first
time, there is substantial Brazilian and
international demand for Brazilian
equities outside the blue-chip companies,
and for secondary offerings. This has
resulted in large scale wealth
diversification and has increased interest
in private equity investment in Brazil due
to the greater availability of the classic
non-strategic exit – an IPO.

Now 2006 has begun with Sonae’s
proposed €10.7bn takeover of Portugal
Telecom, Portugal’s most significant
company. This deal, with its direct
ramifications in Brazil, (where Portugal
Telecom controls, with Telefonica Moviles,
Brazil’s largest mobile telephone
company, Vivo) illustrates the deep
interconnections between Latin America
and the Iberian Peninsula.

In fact, several IPOs launched in Brazil
in 2005 were originated by or have links
to Iberian companies such as OHL Brasil,
UOL – Universo Online and EDP –
Energias do Brasil. The five operating
companies comprising Vivo also just
completed a five-way merger by which
Portugal Telecom and Telefonica Moviles
accomplished a legally integrated
platform in Brazil.

Consistent with this trend, there has
been renewed demand for Iberos and
Latinos in the United States to work for
major law firms and investments banks
that are active in the Spanish and
Portuguese speaking worlds. Portuguese
and Spanish language skills and
knowledge of the local culture and markets
are now important tools for any major
New York law firm seeking to sustain or
increase its presence in the region.

For the firms, retaining lawyers with
cultural connections to spanish and
portuguese markets, who have been
exposed to US legal education has proven
to be an effective way to enhance ties to
the region, while ensuring delivery of a
top-quality, tailored service.