At a regulatory level, Colombia has achieved an important development of merge and acquisitions (“M&A”) transactions, seeking protection of the right to competition and guaranteeing fiscal stability, among other relevant matters. These are the main provisions when talking about M&A transactions:

(i) Colombian Code of Commerce which establishes the fundamental regulation of M&A.

(ii) Law 222 of 1995 modernized the regulations established in the Colombian Code of Commerce, facilitating the processes of corporate restructuring.

(iii) Law 1258 of 2008 establishes the rules applicable to M&A of simplified stock companies (sociedades por acciones simplificadas) in Colombia.

(iv) Law 964 of 2005 which regulates the negotiation of securities and M&A operations in the capital market, establishing additional requirements for them.

(v) Organic Statute of the Financial System and Decree 2555 of 2010 compiles the applicable rules to M&A operations in the financial sector.

(vi) Law 1340 of 2009 which establishes the applicable rules to control M&A operations in terms of competition protection.

(vii) Tax Statute that establishes the tax effects and minimum tax requirements that must be met in M&A transactions.

On the other hand, the regulatory structure in Colombia regarding M&A transactions has the supervision of different authorities, namely:

(i) The Financial Superintendency of Colombia (“SIF”), is the competent authority when there are M&A operations of financial sector entities and where listed regulated companies are involved.

(ii) The Superintendence of Industry and Commerce (“SIC”), studies the impact that this type of operations can have on the market. The SIC also have the competence to impose conditions or reject operations that generate anticompetitive effects in the market.

(iii) The Superintendency of Companies (“SIS”), may intervene in M&A processes, especially when intervened regulated companies are involved.

(iv) The Bank of the Republic of Colombia competent to regulate situations where there is foreign investment in companies under certain conditions, or where the operation may affect the economic system.

Currently, the M&A market in Colombia is going through a more selective stage, in which the number of transactions has contracted while value has concentrated in fewer, larger-scale operations. This responds to a progressive adjustment of the market to economic uncertainties, exchange rate volatility, and changes in the tax and regulatory framework, among other relevant factors. However, this adjustment has not been a decisive factor in stopping market activity altogether, as the country continues to offer relevant investment attractions such as the strength of different sectors of the economy and its geographic diversification.

The technology, financial services, and renewable energy industries have been played a key role in sustaining market activity, as have the food and agribusiness industries. Looking ahead, the behavior of the market will also be influenced by the political and economic dynamics associated with the electoral cycle anticipated for 2026.

Technology, financial services and energy industries have been the sectors driving M&A activity in Colombia most consistently in recent periods. An example of this is the recently completed merger between Banco Davivienda S.A. and Scotiabank Canada, through which Davivienda acquired Scotiabank’s operations in Colombia, Costa Rica and Panama.

The energy transition agenda pushed by the current government has been a catalyst for deal activity in the renewables sector, with this sector registering notable growth in the number of transactions in recent periods. Meanwhile, technology and digital services continue to attract sustained interest, driven by the cross-sector reach of these businesses into finance, education and legal services, among others.

Considering the economic and political conditions, we believe the following factors will significantly influence M&A activities:

(i) Energy Transition

The current administration’s push to reduce Colombia’s dependence on fossil fuels and accelerate decarbonization across industrial sectors has created a steady pipeline of deal opportunities in the renewables space. Oil, gas and mining companies are increasingly looking at strategic acquisitions as a way to reposition their portfolios ahead of an energy landscape that is shifting faster than anticipated.

(ii) Change of government

Due to the presidential and congressional elections scheduled for 2026, investors may adopt a more cautious behavior, as they must assess the political and regulatory risks they face. In the M&A market, many companies may decide to postpone their strategic decisions until they are clear about the political, economic and tax orientation of the next government, since changes in administration have historically brought shifts in regulatory policy and tax conditions that directly affect the structuring and cost of transactions. However, there are investors with a higher risk tolerance as consequence, for example, of the length of their projects, who can take advantage of this political uncertainty to execute these transactions.

(iii) Strategic Growth and Market Consolidation

Regardless of the economic or regulatory environment, companies will consistently look to M&A as a tool to accelerate growth, expand into new markets or customer segments, acquire capabilities they do not have internally, and consolidate their position within a given sector. In Colombia, this dynamic is no different, as businesses across industries continue to find in acquisitions and mergers a faster and often more efficient path to scale than organic growth alone, which sustains a baseline level of deal activity even in periods of broader market uncertainty.

Under Colombian law, the primary mechanism for acquiring a publicly traded company is the Public Tender Offer (Oferta Pública de Adquisición — OPA). Persuant to article 6.15.2.1.1 – Decree 2555 of 2010, if someone intends to acquire control, either directly or indirectly of any company listed on the stock market, to; (i) become a beneficial owner of 25% or more of the capital with voting rights or (ii) increase its participation by more than 5%, having previously being a beneficial owner of 25% or more of the capital with voting rights, will have to address a Public Tender Offer to all the shareholders of the company.

Additionally, it is also possible to acquire shares directly in markets such as the Colombian Stock Exchange (Market Purchase), without exceeding the aforementioned percentages, otherwise, the obligation to present the Public Tender Offer must be fulfilled.

Other options for acquiring a publicly traded company are:

(i) Acquisition by merger, where a listed company may be absorbed or merged with another company, where the agreement may include as consideration payment in the form of shares.

(ii) Spin-offs, in which the public company divides its assets or issues new shares, used especially when partial acquisitions are made.

(iii) Stock Swap, a company which seeks to be an acquirer, may offer its own shares in exchange for the shares of another company.

The extent of publicly available information on a target company depends largely on whether it is listed on the stock exchange or privately held.

For publicly traded companies, high standards of transparency are required due to the disclosure obligations of the stock market regime. Information publicly available for this type of company consists of: (i) annual auditable financial statements and quarterly non-auditable financial statements, (ii) corporate governance reports and (iii) any relevant fact or legal situation that may have an impact on the share price. Companies operating in regulated sectors are also required to file additional reports with their respective supervisory authority such as the SFC in the case of financial sector entities.

For private companies, publicly available information is limited to basic corporate data registered with the Chamber of Commerce of the company’s domicile, and no further disclosure obligation applies.

Due diligence in M&A transactions must be tailored to the specific characteristics of each deal, considering its size, complexity, the nature of the parties involved, the assets or the projects developed by the company and the sector in which they operate. The exercise should be designed to surface any risk that could affect the valuation of the business or put the transaction itself in question, while also ensuring compliance with any regulatory requirements applicable to the particular operation.

Regardless of the transaction’s scope, a thorough review of the corporate structure is always warranted, covering key contracts, pending or threatened litigation, and the financial position of the target, including existing credit obligations. Given the complexity of the Colombian tax regime, fiscal exposure deserves particular attention.

Depending on the size of the operation, from 3 to 10 years of operating history should be reviewed; specific areas such as anti-money laundering and anti-corruption, cybersecurity and personal data protection shall be detailed studied. Likewise, due to robust Colombian protection to labor matters, labor contracts, union agreements, if any, specific cases of reinforced labor stability, independent contractors, among others, should be part of the due diligence process. Additionally, identifying how target companies are incorporating artificial intelligence tools in their operations has become an increasingly relevant area, particularly in terms of compliance with intellectual property regulations.

In Colombia, corporate decisions in M&A transactions are distributed between two main bodies. The first is the General Shareholders’ Assembly, or Board of Partners in limited liability companies, and the second is the Board of Directors, each operating within its own level of authority.

The General Shareholders’ Assembly or Board of Partners sits at the top of the corporate structure and holds exclusive authority to approve mergers, spin-offs and transformations. Below that level, the Board of Directors, where it exists, plays a filtering role in M&A processes by representing shareholder interests and providing strategic guidance. Depending on what the bylaws provide, the Board may also have authority to make operational and strategic decisions in connection with a transaction, as long as these do not substantially alter its terms.

It is also worth noting that Colombian law grants shareholders the right of withdrawal when an approved transaction imposes greater liabilities on them or diminishes their equity rights, whether by reducing their percentage of participation, decreasing the equity value of their shares or limiting their ability to transfer them.

As previously mentioned, the administrators fulfill essential functions to carry out operationally the M&A in Colombia; their fundamental duties are enshrined in article 23 of Law 222 of 1995, this article requires to act with good faith, loyalty and diligence of a good business name.

Applying diligence in the above-mentioned operations implies that the administrators must watch over the interests of the corporation and especially of the administrators without distinguishing between the majority and minority interests. Likewise, the administrators must rigorously evaluate the offers, avoiding any contingency, resorting to technical evaluations when merited, in other words, it must be an active and informed participation focused on maintaining the operation in the same way to avoid events that could affect the acquisition.

Regarding the duty of loyalty, it must be manifested in these operations by placing the interests of the company and its shareholders before those of the individuals or third parties involved, thus avoiding any conflict of interest and in the event of such a conflict, forming and refraining from participating in the decision.

Generally, M&A processes in Colombia do not require prior approval or mandatory consultation with employees or other stakeholders. This decision must be made by the competent corporate bodies of the companies, mainly the general shareholders’ meeting or the partners’ meeting.

However, if the structure of the M&A transaction involves personnel restructuring, collective layoffs, or substantial changes in the workforce, prior authorization from the Ministry of Labor is required. Likewise, in merger or spin-off processes, the creditors of the participating companies have a right of judicial opposition, which, if the due diligence processes identify contracts or agreements with third parties that contain change of control clauses or that require express consent for the assignment of contracts, the authorizations will be subject to the terms of those agreements.

Conditionality is a fully accepted element and constitutes a practice aligned with international standards in M&A transactions. The parties usually agree on conditions precedent or conditions subsequent, examples of which include obtaining authorizations from administrative authorities and the consent of third parties who may be affected by the transaction, among others.

The negotiation of these clauses considers the regulatory risks that such transactions may face, especially antitrust approvals by the Superintendency of Industry and Commerce. It also takes into account more elaborate contractual mechanisms to manage the uncertainty associated with macroeconomic processes or force majeure situations. These transactions often include provisions on long-stop dates, hell-or-high-water clauses, and reverse break fees.

However, it is important to note that publicly traded companies are subject to a more restrictive regime under Decree 2555 of 2010, which establishes that the terms of Public Tender Offers must be subject to minimum conditions for acceptance of the shares (when a minimum purchase of shares is expected that economically justifies the transaction or that these do not constitute an abuse of a dominant market position).

In principle, exclusivity agreements in M&A processes are usually agreed upon in the preliminary stages of negotiation. These stipulations are often included in letters of intent (LOI) or memorandum of understanding (MOU). Current practice has shown that exclusivity agreements have become the most widely used and heavily negotiated protection mechanisms in M&A transactions. This exclusivity is not limited to negotiating with third parties but also seeks to tie its duration to specific milestones in the process.

In some cases, the parties decide to regulate exclusivity as an agreement that is independent and separate from the LOI or MOU, allowing the acquirer to negotiate the inclusion of penalty clauses or different sanctions for breach of the agreed exclusivity obligation. Although there is no absolute exclusivity in Public Tender Offers that prevents competing bids, there are mechanisms that protect the initial bidder, such as break fees, which provide compensation for the acquirer if the transaction does not close for predefined reasons, such as the seller’s acceptance of a competing bid.

Apart from the break fees mentioned above, acquirers in Colombia often use various contractual mechanisms to protect transactions and manage risks. On the one hand, it is possible to enter into agreements to regulate the exercise of political and economic rights, such as establishing restrictions on the transfer of shares (lock-up periods) or establishing different rules to ensure the stability of control after the closing of the transaction.

Likewise, call and put options can grant a shareholder the right to buy or sell their stake to another partner at a predetermined price or formula, protecting minority shareholders by ensuring them an exit or majority shareholders by guaranteeing them a path and enabling them to consolidate their control. Finally, it is common to see warranties and indemnities insurance or W&I insurance, as it allows gaps between the parties to be closed by transferring the risk of non-compliance with the seller’s representations to an insurer, streamlining negotiations and reducing the need for price holdbacks or escrow accounts.

Cash payments tend to predominate as a form of consideration in the Colombian M&A market, especially in transactions involving medium-sized or small companies, due to their simplicity in closing deals and the immediate certainty they guarantee for the seller.

However, there has been a significant increase in the use of hybrid structures, combining cash components with deferred payments linked to the achievement of certain targets (earn outs), thus allowing the final value of the business to be determined based on post-transaction performance. This allows the risk to be distributed between the buyer and seller, facilitating the closing of valuation gaps. In some sectors, mixed structures combining cash with equity consideration are observed, aligning the interests of the management team with the performance of the business after closing.

In the case of Public Tender Offer, Articles 6.15.2.1.8 and 6.15.2.1.9 of Decree 2555 of 2010 provide for various forms of payment, such as local currency, foreign currency, and securities; the latter must be listed on a Colombian stock exchange or on an internationally recognized stock exchange in the opinion of the Financial Superintendency. Finally, in the event of a Public Tender Offer in which the consideration is securities, the bidder must offer to pay in cash at least 30% of the shares it intends to purchase.

Colombian regulations establish certain specific thresholds that require public disclosure of shareholdings in publicly traded companies, with the aim of ensuring transparency in the corporate control market. First, when the acquisition of a stake results in control over a private company, the situation must be reported and registered with the relevant Chamber of Commerce.

Second, in the case of publicly traded companies, if an investor acquires 10% or more of the company’s shares, either directly or indirectly, they must report the transaction to the Colombian Financial Superintendency and the corresponding stock exchange; this situation will be published through the mechanisms enabled by the stock exchange. Thirdly, if an investor intends to acquire control of a listed company, reaching 25% or more of the voting shares, they will be obliged to make a Public Tender Offer for those securities, in accordance with Article 6.15.2.1.1 of Decree 2555 of 2010.

Public disclosure of a transaction is usually triggered at specific moments in the process, depending on the nature of the agreement and the nature of the company (public or private). Private companies have no legal obligation to disclose information about ongoing negotiations, unless they are contractually bound to do so or the parties deem it necessary; in that case, an initial disclosure may be the signing of a shareholders’ agreement.

If companies are listed on the stock exchange, the aim is to manage market rumors and information leaks. Likewise, the Colombian Financial Superintendency has emphasized the duty to disclose relevant facts in a timely manner when negotiations reach a degree of specificity that may affect the share price to protect market integrity and prevent the privileged use of information.

Colombian law does not establish a maximum or regulatory timeframe for negotiations or the due diligence process in an M&A transaction. These timeframes are purely contractual, defined by the will of the parties involved in the transactions, based on the complexity of the transaction, the size of the companies, the sophistication of the parties, among other factors. The terms are usually established in preliminary agreements such as LOIs or MOUs.

Practice in the Colombian context has shown that they can take between four and eight weeks in cases of medium complexity and can be extended to six months or more for more complex operations. At the same time, many companies have adopted artificial intelligence tools for due diligence and contract review, thereby shortening times and mitigating risks to a certain extent. The terms mentioned above may be extended if the transactions require approval from a regulatory entity, in which case it is advisable to incorporate automatic termination clauses (long stop dates) that enable the parties to terminate the agreement if the specific conditions are not met within the established deadlines.

The maximum period between the announcement of a transaction and its closing varies significantly depending on the type of transaction. In the case of private transactions, the schedule is freely agreed upon by the parties and there is no legal maximum time limit. However, current market practice has shown that the review times of the Superintendency of Industry and Commerce (SIC) for antitrust approvals can significantly extend the closing of transactions. In such cases, automatic extension clauses conditional on the decision of the SIC or the corresponding authority are usually agreed upon.

However, for publicly traded companies, the law establishes specific deadlines for certain stages of the transaction process. For example, Article 6.15.2.1.7. of Decree 2555 of 2010 establishes that: (i) the notice of the Public Tender Offer must be published at least three times at intervals of no more than five days, and (ii) the deadline for acceptance of the Public Tender Offer, although determined by the offeror, may not be less than ten business days or more than thirty business days from the date on which the period for receiving acceptances begins.

Yes, there are specific circumstances in which a minimum price is set for shares in the context of a Public Tender Offer; although, as a general rule, the price is freely determined by the offeror, Article 6.15.2.1.10 of Decree 2555 of 2010 imposes limits to protect shareholders.

First, the price cannot be lower than the highest price that the same bidder would have paid for shares of the same class in the three months prior to the request for the Public Tender Offer. Second, if there is a preliminary agreement for the offer, the price cannot be lower than the highest price established in that preliminary agreement. Third, if there is a competing Public Tender Offer, the price cannot be lower than the price of the original Public Tender Offer.

In certain cases, such as the compulsory purchase of minority shares when another shareholder acquires more than 90% of the company’s capital (squeeze-out in accordance with Articles 6.15.2.1.22 and 6.15.2.1.23 of Decree 2555), or in indirect or subsequent acquisitions, the price must be determined by an independent appraisal entity, which will be qualified according to its suitability and independence by the Financial Superintendency of Colombia. In the case of private companies, in accordance with Article 90 of the Tax Statute (Decree 624 of 1989), the sale price of shares cannot be less than 130% of their intrinsic value, to prevent tax evasion through undervalued transfers.

Under corporate law, and specifically under Colombian law, there is no peremptory or express prohibition. However, the viability of financial assistance depends on compliance with the duties of loyalty and diligence of administrators set forth in Article 23 of Law 222 of 1995. In this regard, any financial support must be intrinsically linked to the benefit of the corporate interest in order to avoid constituting an abuse of rights or misuse of power. In the current market, the mitigation of this risk is reflected in the structuring of liability limitations, where maximum compensation limits (Cap) and claim thresholds (Basket) are established.

This contractual architecture is fundamental in the context of financial assistance, as it transforms an uncertain legal risk into a clearly defined financial exposure. By agreeing on these limits, the parties ensure that any legal challenges or conflicts of interest arising from the financing granted by the target company do not affect the entire transaction price but remain within predictable economic ranges. In this way, the Cap acts as a protective ceiling for the seller in the event of catastrophic contingencies, while the Basket professionalizes management by avoiding litigation over immaterial amounts, allowing the transaction to maintain its financial stability despite regulatory challenges.

Freedom of contract allows the parties to choose the applicable law, with Colombian law clearly dominating, governing a considerable percentage of transactions in the country. However, there is also a strategic use of foreign laws in transactions, mainly New York law. A marked trend is specialization in dispute resolution. On this point, transactions opt for arbitration as the exclusive forum, which almost completely displaces ordinary justice. This legal ecosystem is complemented by the adoption of international standards in the drafting of contracts, where even under local law, concepts such as Sandbagging are incorporated, which is expressly regulated within the agreements, demonstrating a transition towards a hybrid contracting model that combines the security of Colombian civil law with the flexibility of common law.

To carry out this type of transaction, the buyer must strictly comply with Decree 2555 of 2010. Mandatory documents include the offer notice and the prospectus for the takeover bid, which must detail the financial justification, risks, and sources of funds. One aspect of great importance in public documentation is the accuracy of the information at closing. In Colombia, contracts use the bringdown condition, a safeguard that requires confirmation that all published or delivered representations and warranties are accurate on the closing date. In this regard, full compliance with these representations is an unavoidable condition precedent to the completion of the transaction, thereby ensuring full transparency to the market and regulators.

The transfer is completed with the endorsement, registration in the Shareholders’ Register, together with the cancellation and issuance of securities. In Colombia, the investment vehicle par excellence is the share purchase agreement (SPA), which is the most used in this type of transaction. From a tax perspective, the transaction may be subject to income tax or capital gains tax. Likewise, for foreign investors, registration of the investment with the Central Bank is a mandatory requirement to ensure the channeling of foreign currency and avoid penalties.

However, because the transfer of ownership is immediate but contingencies may arise years later, the Colombian market has standardized certain indemnity guarantees, such as a holdback agreement (retention of a portion of the price for a specified period) and escrow (deposit with a third party), mechanisms that ensure liquid funds to cover any breach of representations and warranties (R&Ws). Furthermore, the provision of the Exclusive Remedy clause establishes that monetary compensation is the only way to compensate for damages due to errors in formalities or unforeseen contingencies, with the parties waiving the termination of the contract in order to preserve the stability and firmness of the transfer of ownership.

The Colombian market continues to be characterized as largely private, with a concentrated ownership structure that makes hostile takeovers difficult. Instead, the market favors negotiated and friendly transitions, protected by non-competition agreements included in transactions. These agreements are not minor accessories, as they shield the acquirer from disruptive actions by the seller after the exit. This trend toward contractual stability, coupled with the fact that some deals include survival periods for operating statements, reflects a business ecosystem where mutual trust and operational continuity take priority over transactional aggressiveness.

Directors are empowered by Article 23 of Law 222 of 1995 to act in defense of the company’s interests, which allows them to implement tactics such as seeking alternative buyers (White Knights). However, the most effective protection in the current environment is the MAC/MAE (Material Adverse Effect) clause, which is present in a considerable percentage of transactions. This clause allows management to monitor the stability of the company between signing and closing, granting the right to terminate the agreement if catastrophic events occur. Within the wording of these contracts, changes in general economic conditions or acts of terrorism are excluded from the definition of MAC, forcing directors to focus their defense on business-specific risks (Business-Specific MAC). Thus, protection is not only provided in legal or statutory terms, but also resides in a technical distribution of risk that prevents opportunistic acquisitions during periods of instability.

Under stock market regulations (Decree 2555 of 2010), the acquisition of a stake that grants control in a listed company triggers the obligation to make a takeover bid. In the case of private companies, the obligation arises from the right of first refusal. To ensure that the buyer can meet these financial obligations and cover possible post-closing adjustments, the market has standardized the use of guarantees, using contract provisions such as holdbacks and escrow accounts. In addition, transactions use the Closing Account Mechanism (CAM) to determine the final price, which ensures that the mandatory offer reflects the company’s financial reality at the time of the effective transfer. These tools ensure that shareholders receiving the mandatory offer receive a technical and audited value, minimizing disputes over the subjective valuation of each party.

In the absence of any stipulation to the contrary, minority shareholders enjoy inspection, voting, and dividend rights. Contractually, their protection has been refined through the regulation of sandbagging. Thus, some transactions are governed by a pro-sandbagging rule (either by express agreement or by silence in contracts subject to arbitration), allowing the acquirer to claim for breaches even if it had prior knowledge of them. This indirectly benefits minority shareholders by raising the seller’s standard of diligence. However, it should be noted that their capacity for action is limited by liability baskets. These thresholds are usually set in terms under which the minority shareholder can only take action when the accumulated damages exceed a material amount, avoiding litigation for smaller amounts that could destabilize the management of the company.

Complementing these indemnity protections, a common structural alternative in the Colombian market involves the inclusion of unanimity majority clauses in the company’s bylaws for specific strategic matters. By moving away from majority rules for decisions, the minority shareholder gains a right that ensures their participation in the company’s direction. Without these statutory safeguards, the immediate consequence would be the marginalization of the minority investor, whose interests could be superseded by the dominant will of the controlling shareholder, leaving them with no real influence over the target company’s core destiny.

In Colombia, there is no legal provision for a “squeeze-out” that is expressly regulated. Therefore, these mechanisms must be established through Shareholder Agreements to facilitate liquidity and exit strategies. Drag-along clauses serve as the standard tool to compulsorily acquire minority stakes by forcing their exit in the event of an offer for 100% of the company. Conversely, Tag-along clauses are frequently incorporated to protect minority interests, granting them the right to join the sale and exit the company under the same terms and conditions as the majority shareholder, thereby preventing them from being left behind in a change of control.

To facilitate these total exit processes and mitigate price uncertainty, some transactions often use post-closing adjustments (CAM). A significant development is the growth of Warranty and Indemnity Insurance (W&I Insurance), which allows the acquirer, in cases of mandatory acquisition of minority shareholders, to have an external source of recovery in the event of default by the seller, facilitating negotiations where the minority shareholder does not have the financial capacity to provide broad guarantees or maintain funds in escrow for extended periods.