M&A textbooks describe sale processes with dozens of buyers, competitive auctions and market multiples pulled from global databases. None of that applies to the Ecuadorian market without adjustment, and applying it without adjustment costs money.
Not enough comparables
In Ecuador there are not enough local transactions to build sector multiples with statistical rigor. One has to work with regional and international comparables and adjust them for size, liquidity and country risk, with judgment and with evidence. A multiple taken from a database without that adjustment is not a valuation; it is a number.
Fifteen to twenty-five names
The real universe of buyers for a mid-sized company in Ecuador is fifteen to twenty-five names: local strategics, regional groups with a presence or an interest in the country, and a handful of funds. And those names know each other. That makes a broad auction a bad idea here by arithmetic, not by theory: when the list is short and connected, each additional contact increases the risk of a leak more than it increases the probability of a better offer.
Leaks are a first-order risk
When the market learns that a company is for sale before it should, the process breaks on five fronts, in this order: key employees start looking at options, customers renegotiate terms or diversify suppliers, suppliers tighten payment terms, banks review credit lines, and competitors use the news commercially. That is why in Ecuador the right process is narrow, sequential and confidential: a few well-chosen buyers, approached in order, with information released in stages.
Andrés Proaño · Managing partner, Axioo Financial Consulting