M&A Readiness in Brazil: Part 1 of 3
The readiness gap

Most founders underestimate what it takes to be M&A ready, and it often takes a failed negotiation before a company applies the necessary focus.

We have written before about why a company can be profitable and still not be ready to sell. There are many valuable and profitable companies that don't stand up to a meticulous due-diligence process, and the current market is allowing buyers to become increasingly demanding in their expectations around governance.

For sellers, this means that prioritizing M&A readiness in the years before a sale can have a significant impact on their ability to protect company value and negotiate favorable terms in an eventual sale.

Fewer Deals, More ScrutinyIn the first half of 2026, Brazil's M&A market showed a clear pattern: deal count fell 30% year over year, to 744 transactions in the 1st semester, while the capital deployed rose 7%, to R$186.2 billion.¹ Fewer buyers did more, larger, and more deliberate deals: a market getting more discerning, not smaller, where buyers shop less and spend longer deciding.

Private equity, in particular, is being forced to become far more discerning. Weak economic growth, fiscal uncertainty, and high interest rates are making it harder for fund managers to build investment cases that deliver returns adequate for the risk, and difficulty exiting portfolio companies remains one of the industry's main constraints, with exit volumes still below historical levels. With a growing backlog of companies still sitting in portfolios, the argument to invest into new portfolio companies needs to be extremely compelling.²

Read together, these numbers describe a market where capital is concentrating in fewer, larger, better-documented targets. For an owner thinking about an exit in the next one to three years, the practical read is blunt: there are real buyers, with real capital, actively looking. However, they are being noticeably more selective, underwriting every target to a higher standard of diligence.

M&A ReadinessTo a seller, M&A 'readiness' means being prepared for exactly what a buyer's diligence team is testing. In our experience running sell-side processes in Brazil, it collapses into three questions: Is the company governed, or just run? Do the financial statements hold up under independent scrutiny? Can the business generate results without its founders?

None of this is about legal compliance. A company can be fully compliant with Brazilian corporate and tax law and still fail all three tests, because the real question is whether the value a buyer sees today will still be there, intact and legally transferable, twenty-four months after closing.

Each one, unresolved, shows up in the deal either as a lower price, a longer earn-out, more retained risk for the seller, or a buyer who simply walks.

The Governance GapIn Brazil, we see a lack of corporate governance derail more M&A negotiations than anything else. Research by IBGC, the Brazilian Institute of Corporate Governance, in partnership with PwC, confirms the scale of the gap: a survey of 270 privately held, family-owned companies across 21 Brazilian states.³ The headline finding: only 11.7% of companies with an active founder had a statutory board (conselho de administração) in place, against 37% of companies where the founder was no longer involved day to day.³ Succession plans for key leadership roles existed at just 27.6% of the companies surveyed.³

A board is not a legal requirement for most private Brazilian companies, and no buyer expects a family business to look like a listed one. What a buyer wants to see is narrower than the word 'board' suggests, and more useful: that decisions get made and recorded somewhere other than one person's head, that shareholders have a documented way to resolve disagreements, and that the company keeps functioning through a leadership transition.

3. Equity Story

Why should someone buy us?

2. Business Quality

Customers Growth Operations Management Risk & Compliance

1. Business Hygiene

Financials Tax Legal Contracts Corporate Structure Governance

The Financial-Quality GapOrganized financial statements are the minimum requirement just to be at the table. Buyers price a company on the numbers a quality-of-earnings review confirms, not the numbers management presents, after normalizing for one-off items, partner salaries paid as dividends, related-party transactions, informal arrangements, and working capital swings that a founder-run business often does not track cleanly.

Audited or independently reviewed financials, a clean separation between personal and corporate expenses, mapped tax and labor contingencies, and management reporting that exists independently of the founder's own spreadsheet are not glamorous, but they are what allows a process to move at the pace a seller needs to maintain a competitive M&A process, rather than the pace a nervous buyer sets.

The cost of skipping this step is rarely a rejected deal. More often it is a process that drags on twice as long, a price that gets chipped away line by line during diligence instead of negotiated once up front, or a structure that shifts more of the payment into an earn-out because the buyer won't underwrite numbers it cannot fully verify.

The Founder-Dependency ProblemThe third question is about founder-dependency: how much of the company's ongoing performance rests on the founder personally. It is the hardest of the three to fix quickly, because it is behavioral rather than documentary. The skills that let a founder build a company from the ground up are rarely the same skills needed to scale it.

Buyers probe this dependency continuously, from the first conversation through signing: Could the company run for 90 days if the founder went unreachable? Does revenue depend on relationships only the founder holds? Is there a real second layer of management with decision authority, or just a layer of titles that still reports every call up to one person? Does institutional knowledge live in documented processes, or only in the founder's head?

Every dependency gets priced as risk. Most often it's a longer earn-out tied to the founder's continued involvement; sometimes it's a lower headline multiple; occasionally a buyer simply walks once the pattern becomes clear. It's a hard pill for many founders: the personal relationships, instinct, and hands-on control that built the company are exactly what a buyer needs to see it can run without.

The Succession WaveThere are roughly 3.1 million mid-to-large private companies in Brazil, and 13% of them (about 400,000) face a retirement-driven succession decision within the next decade. As that transfer plays out, competition among sellers will intensify, and buyers are only getting more selective. M&A readiness cannot be an afterthought saved for the run-up to a sale; it has to be a constant state of play.

Readiness is only half of the equation, though. Governance and clean financials earn a company the right to be judged on its merits, but they do not, by themselves, create the value a buyer is willing to pay for. What moves the number is how value gets built inside a company, in a market where the shortcuts that work for buyers elsewhere, cheap debt, rising multiples, mostly do not work here in Brazil.