Peru has introduced secondary legislation governing the implementation of the country’s recently approved M&A control framework.

Congress approved the M&A bill in December, giving competition authority Indecopi powers to review and, if deemed necessary, block planned M&A transactions.

A key aim of the move is to support competition in the Andean nation. Under the framework, Indecopi can block a business merger if it considers there are reasonable indications the move would result in the merged entity gaining a dominant market position.

Operations involving certain public-private partnership projects, including those established for building public infrastructure, do not fall under the scope of the rules. The secondary legislation was introduced via a supreme decree, published Thursday in the country’s official gazette.

The confluence of political noise in Peru – the country has presidential elections in April following several years of congressional drama – and a second wave of COVID-19 infections suggests dampened dealmaking activity this half, Diego Carrión, a partner at local law firm Hernández & Cía, said in a forthcoming special report produced by research firm Transactional Track Record and shared in advance with BNamericas.

Carrión (pictured) also cited the impact of the new framework: “Lastly, along with these two major aspects, comes the introduction of the merger control regulation … with its own particularities.” Fellow Hernández & Cía partner Enrique Cavero outlined three potential changes or impacts: a larger number of deals scrutinized than originally expected, uncertainty generated by Indecopi’s scope of deal review powers, and longer dealmaking processes stemming from Indecopi’s expected caseload.

Given their high levels of revenue which makes them subject to Indecopi’s review process, industries such as mining, energy, and infrastructure, will likely be the most affected, Carrión said. Carrión said investors from the US and other countries were used to working with such frameworks.

“The main concern, more than the mere introduction of this regime, is its application … Important note: no one wants to be the first to test this new regime,” he said in the TTR report. In terms of dealmaking, Peru saw 10 in January-February, down 52.3% year-on-year, according to TTR data. Reported value was US$668mn, up 31.9%.

Source: Business News Americas / BN Americas - Chile