“These approval processes are often like a toll bridges. You have to pay to cross,” veteran Triangle M&A attorney Jim Verdonik told WRAL TechWire on Friday.
“This is likely to slow down a closing until Red Hat and IBM develop a strategy for dealing with the Brazil market,” Verdonik, who recently launched Innovate Capital Law in Raleigh along with Benji Jones, noted.
“I expect there will be a negotiation in which Brazil will negotiate some benefits for Brazilian companies,” Verdonik said.
Can Brazil stop the deal? Verdonik says no.
“Brazil can’t stop the merger, because IBM and Red Hat are not incorporated in Brazil,” he explained. “It is, however, within Brazil’s power to make it difficult for Red Hat and IBM to do business in Brazil.”
So what happens if Brazil doesn’t endorse the deal?
“If Brazil tries to impose too high a price for approval Red Hat and IBM may decide to close the merger without approval and negotiate concessions after the merger,” Verdonik said.