When a state-owned Chinese bank went to buy out a South African bank’s interests in Argentine financial institutions, it found a lawyer in the logical place: Atlanta

In a sign of the increasing complexity of cross-border mergers, Maria Fernanda Farall, a partner at Jones Day‘s Atlanta office, led a transaction spanning four continents, partnering with the firm’s offices in London and Beijing

“The only connection to the U.S. was me being here in Atlanta,” said Ms. Farall, a native of Argentina who has worked on major deals there.

The $750 million transaction closed Nov. 30, transferring the majority of South Africa-based Standard Bank Group Ltd.‘s interests in its own Argentine subsidiary and two other institutions to Industrial and Commercial Bank of China Ltd. 

Two years in the making, the deal illustrated trends playing out in the Latin American M&A market and how location is becoming less relevant in how law firms are chosen for international deals.  

ICBC, one of China’s largest banks, was following the financial needs of Chinese firms that have begun to invest in the energy and mining sectors across South America to feed their home country’s voracious appetite for natural resources, Ms. Farall said. 

For American firms, the reasons for investing in fast-growing Latin America may be different, but the potential pitfalls are the same, particularly in Argentina, which has enacted a variety of policies trending toward protectionism over the last year. 

“The first step is the due diligence, and there are certain issues that are more of a red flag in Latin America than you would face in a typical acquisition in the U.S.,” she said. 

After determining whether making an acquisition is the appropriate market-entry strategy, a firm must assess the financial viability of its target. That can be difficult when so many Argentine companies are family-owned and therefore haven’t been as rigorous about record-keeping as American firms might expect, Ms. Farall said. 

U.S. firms also need to watch out for tax compliance issues and variations in employment standards, which across the region tend to be more protective of the workers than the at-will arrangements common in the United States. 

“In Latin America, it’s a little more difficult to terminate an employee. The general idea is that you have to have cause, and the cause is defined in the statute,” Ms. Farall said. 

There’s also the issue of compliance with the Foreign Corrupt Practices Act, the U.S. law that forbids American companies from bribing foreign officials. The Securities and Exchange Commission and the Department of Justice have increased their probes for violations in Latin American countries in recent months, she said. 

Corruption is common in many Latin American countries, despite laws prohibiting it. Argentina, for instance, ranks 100 out of 183 countries in 2011 Corruption Perceptions Index published by Transparency International

“In most of these countries, bribery of government officials is a crime, but it’s not enforced, and there’s no equivalent of FCPA, so there’s a cultural issue of enforceability and extraterritorial effects of a U.S. law in these countries,” Ms. Farall said. “There’s a lot of tension and a lot of education that you have to do with local companies when engaging in business in South America, where corruption is high.”

As for Argentina’s increasingly stringent limits on foreign activity – whether outbound trade or inbound investment and ownership – Ms. Farall has grown up seeing cycles of government heavy-handedness based on the whims of elected leaders. 

For instance, Argentina is one of the toughest places in the world to get a construction permit, ranking No. 171 out of 183 countries, behind Afghanistan and Zimbabwe, according to the World Bank. It can sometimes take up to six months to get a business registered, Ms. Farall said. 

Those are risks American firms will have to take into account in a country that a little more than a decade ago faced a major financial crisis in which it defaulted on its foreign-debt obligations. 

“People still invest, but you’re not going to see the level of investment that you see in other countries that don’t face these difficulties,” she said. 

Jones Day is well-positioned to help companies engaged in multinational transactions, Ms. Farall said. On the ICBC deal, she worked heavily with the firm’s attorneys in London, where the South African bank was operating through a subsidiary. She also consulted with partners in Beijing. 

Jones Day last year opened an office in Sao Paulo but has no offices in Argentina. 

Read more: Jones Day Panel Reviews Risks and Opportunities in Brazil

Ms. Farall has also worked on deals in Mexico and Brazil. To contact her, click here

As managing editor of Global Atlanta, Trevor has spent 15+ years reporting on Atlanta’s ties with the world. An avid traveler, he has undertaken trips to 30+ countries to uncover stories on the perils...