American auto dealer expands to Brazil

February 14, 2013
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American auto dealers

Mergers and acquisitions are typically great opportunities for businesses, but they must be conducted properly, especially if they involve international organizations. Due to its rapidly growing economy, Brazil has become increasingly attractive for many U.S. businesses, but companies considering such deals must observe all of the country's laws.

Group 1 Automotive, an auto retailer based out of Houston, is in the process of acquiring UAB Motors Participacoes S.A., one of Brazil's largest automotive sales organizations. According to an article in the Houston Business Journal, the deal is for roughly $47.4 million cash, 1.45 million shares of Group 1 common stock and the assumption of about $62 million of net non-floorplan debt.

Once the deal is done, Group 1 will assume 100 percent ownership of 18 major automobile dealers in Brazil, which will give the company a huge financial spike. CEO Earl Hesterberg told the news source that while he is optimistic that the deal will yield positive results, he understands that there will be many challenges, particularly early on.

“We started looking at dealerships down there about a year ago and started working on this deal in September,” he said. “In the long term, we think this business is going to grow rapidly in the first year. We are going to have to get accustom to working in Brazil and make major investments in infrastructure and technology.”

Without a full understanding of Brazilian business law, any acquisitions or mergers with companies in the country could falter. It's wise for organizations to hire a Brazilian attorney to look over all contracts before any deal is final. Working with lawyers will also give executives better understanding of the regulations pertaining to their business, which will mitigate the risk of any serious violation.

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