Brazil’s innovative business sector navigated a complex landscape in 2024, with M&A movements progressing cautiously due to the country’s economic scenario. Persistent challenges, such as political and economic instability, tax reform uncertainties, legal unpredictability, aggressive currency fluctuations and high interest rates, continued to influence investment decisions and deal-making activity.
Heightened risk aversion constrained M&A growth, particularly in late 2024. Venture capital fundraising also encountered hard challenges, prompting venture capital houses to adopt a conservative stance, prioritizing follow-on investments in existing portfolio companies over new deals. In that way, investment thesis in Brazil shifted toward companies with financial sustainability and operational efficiency rather than aggressive expansion strategies. This evolution underscored the maturation of Brazil’s venture capital landscape and the strategic refinement of companies’ business models.
While fiscal and monetary policy adjustments remain insufficient to fully restore investor confidence, 2025 is expected to bring a rise in M&A activity and a gradual revival of venture capital investments (IPOs, however, may continue to face headwinds). Certain regulatory advancements in Brazil (such as some clarity on tax reform drivers and the certain new sector-specific regulatory advancements -e.g., the pretty new bioinputs regulation-) could create a more favorable investment climate. Agtechs, biotechs and platform-based businesses with potential for fintech integration and “anything-as-a-service” oriented models are poised to attract substantial interest.
A key trend in 2025 is expected to be the growing prevalence of “venture-style” acquisitions, where larger corporations acquire small- and mid-sized innovative companies. Given the constrained venture capital funding environment, these transactions may increasingly be structured through convertible debt instruments or minority stake acquisitions via capital injections (cash-in) or founder-led equity sales (cash-out). Such deal structures, common in venture capital transactions, offer flexibility and strategic alignment for both investors and target companies. These investment mechanisms, while inherently risky, create opportunities for all stakeholders. Investors can accelerate growth through portfolio diversification and integration of disruptive business models, while target companies gain access to operational synergies and expanded market reach. Meanwhile, founders benefit from liquidity options and clearer medium- and long-term strategic parameters for their businesses.
Furthermore, potential upcoming legal developments are set to play a crucial role in fostering investment within Brazil’s innovation ecosystem. In this regard, a proposed amendment to the Brazilian Startup Legal Framework aims to introduce the “Convertible Investment Agreement in Capital Stock” inspired by the U.S. “Simple Agreement for Future Equity – SAFE”. This reform is expected to simplify venture capital transactions and enhance legal protections for investors and target companies. Additionally, the adoption of artificial intelligence-based tools is expected to play an increasingly important role in optimizing M&A deals, particularly in due diligence processes and the preparation of transaction documents.
Bruno Tanus
Partner at Andrade Maia Advogados (M&A, Venture Capital, Private Equity, Corporate and Agreements)
PhD in Law from the University of Salamanca (Spain) and PhD in Comparative and European Legal Studies from the University of Trento (Italy).