Living in Peru : your everyday companion

Info provided and translated by the
American Chamber of Commerce of Peru (AmCham Peru)

When these opportunities appear, the possible reactions have business, sentimental, legal and financial components, since the total or partial sale of a company is not always seen as a transaction of a real asset for cash. For those who created a company from nothing, or inherited it from those who created it, selling it can represent an emotional cost that is difficult to calculate, something that is commonly complicated when there are numerous close relatives who work in the company, or may even entail elements of pride when the buyer has been a business rival.

Nevertheless, from the financial point of view, the cold considerations to be analyzed are as follows:

• Does the price that I can obtain for my company repay me adequately for the risks assumed in order to get to my present position, including the intangible contributions and the capital used to build it?
• Could there be another “hungry buyer” who can offer a better price?
• If I reject this opportunity to sell, how is my competitive position left, and what possibilities do I have in the medium term to remain profitable and competitive?
• How many competitive spaces does my market have that can attract an important buyer, so that if I don’t sell now, will I be able to do so in the future?

To Sell or Not To Sell

There are certainly intermediate options to the decision to sell, including long-term alliances, partially opening to outside capital and others that are similar. The cash-out opportunity (receiving a large cash payment in exchange for a significant or total part of the business) does not appear very often. Nonetheless, we know many cases in recent months and we presume that their numbers are only going to increase, at least while the perspectives of the country appear so favorable.

In these cases, having effective and experienced financial advisers and good lawyers is necessary in order to evaluate a purchase proposal in all its dimensions. Usually, the company that acquires another has experience in this type of operations and has the people, whether in-house or under contract, with the knowledge to do it efficiently, which does not necessarily the case with a medium-sized company that is the target of the buyer.

Finally, after defining whether or not the transaction is economically advisable, an equally important analysis must be conducted before making a definitive decision: What are the sellers going to do with their money and their time?

In this context, it is important to analyze the non-competition clauses, the age of the managers (how soon is their retirement), the composition of the familiar patrimony, and alternative investment opportunities in the goods and services sector and in financial instruments investments.

In sum, if the opportunity to sell appears, there is much to study and to consider before making the decision. The best moment to sell is different in each case; it depends on you to analyze whether perhaps this moment has arrived.

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Table 1
Evolution of Loans from the Financial to the Private Sector and Delinquency of the Multiple Bank

Table 2

Selective Index of the Lima Stock Exchange
General Index of the Lima Stock Exchange