RALEIGH – Brazil’s decision to revoke its previously announced approval of the $34 billion merger between IBM and Red Hat is likely to delay closing of the deal.

“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.

IBM (NYSE: IBM) declined any comment on the deal. Red Hat (NYSE: RHT) also has not discussed the merger other than some positive remarks from CEO Jim Whitehurst at the recent Red Hat Summit in Boston. Both firms insist the deal will close sometime later this year.

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IBM is set to pay $190 in cash per Red Hat share. The merger was announced last October.

According to media reports, Brazil’s Administrative Council for Economic Defense (or Cade) overruled a decision made by its superintendent earlier in the week to OK the deal without restrictions. The review decision is to allow Cade “to evaluate the implications of IBM’s increased market power after the transaction, which would result in vertical overlaps in the market,” Telecompaper said.

Based on his experiences in negotiating complex merger deals, Verdonik said: “This [decision] is all about market clout. Brazil isn’t as big as the US and EU markets, but its not a small market either.”

The European Union approved the IBM-Red Hat deal – the largest M&A in North Carolina and the third largest tech deal ever – without restrictions on Thursday.

The US Justice Department did so as well.

Now comes the re-do review by Brazil, which is one of South America’s largest tech markets.

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“I expect there will be a negotiation in which Brazil will negotiate some benefits for Brazilian companies,” Verdonik said.

“For examples, protections for Brazilian companies that distribute software for IBM or Red Hat.  Or they may want a joint venture deal for a Brazilian software developer. Or they will want IBM Red Hat to commit to invest in Brazil.”

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.

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“Brazil also has to take into account that any Brazilian companies will be harmed if they are deprived of IBM and Red Hat products. The bottom line is that Brazil cant be ignored, but Brazil can’t do anything it wants without suffering.

“That means we have all the ingredients necessary for a good negotiation.”

Red Hat is based in Raleigh.

IBM operates one of its largest campuses in Research Triangle Park.