At the conference he mentioned that some of the main mistakes made in cross-border M&A operations have to do with cultural differences between countries. In your opinion, do these differences have to do with the way the parties view the negotiation process? Can a handshake have a different meaning, depending on the country, for example?
Yes, there are relevant cultural differences between countries – and they are often underestimated in negotiation processes. It’s not just about the negotiation style, but something more structural: the way each culture views the value of a commitment. For some, an understanding or a handshake may represent a true contractual principle; for others, it is just another step, subject to reopening and litigation. The degree of frontality, transparency or tolerance for parallel agendas varies significantly, as does the comfort in concluding negotiations with topics that are still open. Naturally, the personality of the negotiators has an impact, but the cultural dimension is often decisive. An illustrative example: in the United States, a contract tends to be seen as a comprehensive instrument, inserted in a context of high litigation – where the final economic value can still be adjusted in litigation. In the United Kingdom, it is more common to see longer and more intense negotiation processes, precisely to ensure that the contract, once signed, more definitively reflects the balance between the parties.
And sometimes even when you share the same language?
In cross-border transactions, many errors arise from the so-called “illusion of familiarity”. Sharing a language – as happens in the Portuguese-speaking space – can induce a false sense of alignment, leading investors to lower their negotiating guard. Speaking the same language does not necessarily mean sharing the same cultural references, nor the same way of facing commitments, risks or contractual execution.
At the same time, there is a tendency to project domestic reality as a universal standard. This reading ignores legal specificities and local dynamics – from the weight of regulators to the influence of unions and other informal forces that shape negotiation practice and the execution of agreements. When disregarded, these variables generate misalignments that can compromise the success of the transaction.
Taking this context into account, what lessons would you highlight from your experience advising investments? crossborder and portfolio diversification investments for clients?
From my experience, I would highlight three essential lessons to secure investments crossborder. First, time – not just to close the deal, but above all to prepare it – is critical. Second, the importance of local and multidisciplinary advisory teams, capable of ensuring a fine reading of the context. And, finally, the need to maintain an axis of coordination in the jurisdiction of origin, avoiding “broken phone” effects and false equivalences between legal and business concepts. In short, more demanding preparation, in-depth knowledge of the local reality and clear governance of the process are crucial to avoiding failures in execution and preserving value.
What clauses and “covenants” are gaining weight in M&A operations?
With regard to covenants in M&A operations, we have seen a clear expansion of the risk perimeter reflected contractually. In addition to the classic areas, ESG matters gained weight – initially with a greater environmental focus, but today with an integrated dimension that also covers social and governance themes. This includes not only the organization itself, but the entire value chain, with particular attention to the way human resources and other stakeholders are involved, protected and aligned with standards of ethics and integrity.
Is cybersecurity also an increasingly relevant concern in these agreements?
Yes, in parallel, cybersecurity asserts itself as a transversal and unavoidable risk. Regardless of the sector, all organizations are exposed to cyber threats, which has led to an increasing sophistication of covenants in this matter: from the existence of adequate insurance, to the robustness of technological infrastructures, to third-party risk management and compliance in software licensing. This reinforcement is not only the result of the recent materialization of attacks with significant impact, but also the increasingly demanding regulatory framework – particularly in instruments such as DORA and NIS2 – which impose high standards of operational resilience and risk management in some sectors. In summary, covenants today reflect a broader and preventive view of risk, requiring deeper due diligence and more sophisticated negotiation, under penalty of compromising not only the value of the asset, but the sustainability of the investment itself.
