Legal market overview
The Brazilian business community had long predicted that 2014 would be a sluggish year for the economy, with the combined effects of the 2014 FIFA World Cup and the national elections expected to drag down productivity and increase market uncertainty. The figures show that this was indeed the case: Brazil’s statistics agency calculated that the economy grew by only 0.1% in 2014. However, even with those destabilising events behind it, the country’s investment outlook remains grim. The central bank forecasts that GDP will shrink by 0.5% in 2015, before picking up slightly in 2016.
As a result of the current economic climate, and particularly given the stronger US dollar, private equity deals are on the rise, as cash-rich foreign investors find the valuations of Brazilian companies increasingly attractive. M&A generally continues to tick over well, with 2014 seeing $77.07bn worth of corporate takeovers announced in Brazil – the largest value recorded since 2011.
In addition to the uptick in transactional work, law firms have had their hands full on the regulatory side. Most notably, Brazil’s competition authority CADE (Conselho Administrativo de Defesa Econômica), which was overhauled with the introduction of a new antitrust law in 2011, continues to make global headlines due to the severity of its financial penalties. In 2014, the authority slapped six participants in a cement cartel with a combined fine of $1.4bn, which marked its highest-ever single fine. Competition lawyers are unsurprisingly seeing an increased flow of instructions from companies looking to protect themselves from similar fates.
Also on the compliance side, anti-corruption remains a major work driver following the enactment in January 2014 of the Clean Company Act – Brazil’s new anti-bribery law. The country’s heightened anti-corruption consciousness has been underpinned by the ongoing publicity storm surrounding the ‘Operation Car Wash’ (‘Lava Jato’) scandal, which has engulfed politicians, directors of state-owned energy company Petrobras and several construction companies in a criminal investigation into bid rigging and money laundering.
Among the headlines affecting the legal market, MHM – Sociedade de Advogados in 2015 saw the departure of name partner Ricardo Madrona, who left with a large team of lawyers to establish Madrona Advogados. A week after the split, MHM – Sociedade de Advogados confirmed that it had concluded a formal agreement with Campos, Fialho, Canabrava, Borja, Andrade, Salles Advogados which will see the pair begin an association with a view to completing a full merger within two years; the combination is set to create a law firm of 16 partners and 150 professionals.
The market has seen two other significant law firm launches over the past twelve months. Palma Guedes Advogados, which opened its doors in 2014, is a niche public law firm established by Álvaro Palma de Jorge and Demian Guedes, formerly heads of the public law practices at BMA – Barbosa, Müssnich, Aragão and Veirano Advogados respectively. And in 2015, Demarest Advogados saw the departure of insurance head João Marcelo dos Santos (together with junior partners Daniela de Matos Rodrigues and Keila Manangão and four associates) to launch insurance-focused firm Santos Bevilaqua Advogados; Marco Antonio Bevilaqua, formerly of Mandaliti Advogados, is also a co-founder of the new boutique.(Demarest, it should be noted, has responded swiftly by absorbing the specialist insurance boutique, JBO Advocacia).
Although prone to frequent splits and spin-offs, largely caused by generational conflicts, Brazil’s legal market is sophisticated and mature. Elite firms BMA – Barbosa, Müssnich, Aragão, Demarest Advogados, Machado Meyer Sendacz e Opice Advogados, Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados, Pinheiro Neto Advogados, TozziniFreire Advogados and Veirano Advogados are traditionally held up as the leading full-service players in the market. Brazil is also home to a strong band of boutique firms which are viable alternatives to the market monoliths in particular areas.
The Brazilian Bar Association restricts close collaboration with foreign firms, but some international associations do exist: Campos Mello Advogados enjoys a cooperation with transatlantic giant DLA Piper LLP, and the market also features Tauil & Chequer Advogados in association with Mayer Brown and Trench, Rossi e Watanabe Advogados, associated with Baker & McKenzie.