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Stricter due diligence may slow Brazil’s M&A deals this year

Stricter legal and regulatory scrutiny may slow mergers and acquisitions in Brazil this year, compounding the impact of a harsh recession and lingering political turmoil that is keeping buyers and sellers at odds over valuations, bankers and lawyers said.

In recent months, trade unions and citizen advocacy groups have increased pressure on industry watchdogs and federal auditors to stop state asset sales aimed at cutting Brazil’s debt. More companies tapped antitrust authorities to review rival industry tie-ups, putting the brakes on several deals.

For example, the federal audit court (TCU) halted Petróleo Brasileiro SA’s (PETR4.SA) asset sale program in December, citing the need for more transparent terms. The decision led the state-controlled oil company known as Petrobras to miss a two-year goal of raising $15.1 billion by the end of 2016 by more than $1 billion.

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