Corporate M&A 2025 Comparisons

The M&A market has been stable during the last year. In 2024, the Superintendence of Economic Competition carried out a similar number of authorisations procedures as in 2023. However, fewer transactions have been reported in the media, as most M&A transactions do not exceed the thresholds referred to in 2.4 Antitrust Regulations and involve non-listed companies.

During 2024, M&A transactions showed no major changes in their tendency towards non-listed companies. There has been a more active role for, and scrutiny from, the Superintendence of Economic Competition in those cases subject to its review, which has led the parties to address antitrust and competition matters in more detail.

The food and agricultural industries experienced significant M&A activity in 2024, and there was also interest in potential M&A transactions in the construction and retail industries.

Most of the companies involved in M&A transactions are not listed, and the primary acquisition method is through confidential negotiations and share purchase agreements, subject to the prior approval of the Superintendence of Economic Competition when the transaction exceeds the thresholds set forth in 2.4 Antitrust Regulations.

If any of the parties involved in an M&A transaction are listed, and the threshold set forth in 4.2 Material Shareholding Disclosure Threshold is exceeded, then the acquisition must be made through a tender offer subject to the prior non-objection of the Superintendence of Economic Competition and approval by the Superintendence of Companies, Securities and Insurance.

The primary regulators for M&A in Ecuador are:

• the Superintendence of Companies, Securities and Insurance (with respect to corporate and securities issues);
• the Superintendence of Economic Competition (with respect to anti-trust regulations); and
• the Banking Superintendence (with respect to M&A involving local financial institutions)

When the M&A transaction refers to sectors qualified as strategic by the Constitution (refer to 2.6 National Security Review), the respective sectorial ministry also acts as a regulator for the purposes thereof.

There are no particular restrictions on foreign investment in Ecuador, which provides foreign investors with the same protections and assurances that Ecuadorean investors enjoy within the country.

There are certain specific requirements for foreign investors, such as the need to disclose its beneficial owners to the Superintendence of Companies, Securities and Insurance and to designate a local process agent.

If any of the following thresholds are met, the transaction, regardless of whether it is a merger or an acquisition, must be approved a priori by the Superintendence of Economic Competition.

• The aggregate turnover in the last fiscal year of the parties to a combination exceeds (in units of basic unified wage (BUW), an indicator of the minimum wage, which for 2025 is USD470) (i) BUW3,200,000 for transactions involving financial or securities institutions; (ii) BUW214,000 for transactions involving insurance or reinsurance companies; and (iii) BUW200,00 for transactions involving other companies.
• For parties that are engaged in the same economic activity, a market share equal to or greater than 30% of the relevant market is acquired as a consequence of their combination.

Additionally, if any of the thresholds referred to in 4.2 Material Shareholding Disclosure Threshold are met, regardless of the turnover or the market share, the Superintendence of Economic Competition must give its prior approval to the potential tender offer for it to be authorised by the Superintendence of Companies, Securities and Insurance.

Shareholders domiciled in Ecuador who own more than 25% of a company’s outstanding shares have secondary liability with respect to any and all obligations towards employees derived from labour law incurred by the target company. Those obligations include, but are not limited to, payment of a percentage of the company’s profit and the provision of a retirement pension, regardless of whether the former employee is entitled to receive a pension from the social security system.

There is no formal mandatory national security review of acquisitions in Ecuador. However, if the acquisition pertains to a sector considered as strategic by the Constitution, (energy, telecommunications, non-renewable natural resources, transportation and refining of hydrocarbons, biodiversity and genetic heritage, radioelectric spectrum and water), the government will probably impose additional conditions or other restrictions on acquisitions that could be deemed to affect national interests.

In 2023, a general amendment to the Companies’ Law was enacted regulating, among other things, the redemption of the shares of the acquiring company owned by the target company upon a merger and the possibility of having, in certain circumstances and above certain thresholds, the merger approved by the legal representative of the target company instead of the shareholders.

There have been no material changes to the Companies’ Law in the last 12 months, and there are currently no plans to do so either. Multiple secondary regulations indirectly related to takeovers have been updated, mainly in connection with corporate governance and anti-money laundering measures.

Due to the limited number of public listed companies and the concentration of the controlling interests thereof in families or close-knit economic groups, hostile takeover tenders are unusual. Therefore, stakebuilding in advance cannot be considered customary. If a bidder were to implement a stakebuilding strategy, the law allows it to acquire the outstanding shares of a listed company up to the threshold set forth in 4.2 Material Shareholding Disclosure Threshold, without the need to file a tender offer.

If, within a 12-month period, the bidder intends to acquire – directly or indirectly – 35% or more of the shares outstanding of the target company, it should file for a tender offer for at least 50% of the outstanding shares. If these thresholds are not met, the bidder still can voluntarily opt to file for a tender offer, in which case such offer shall be subject to the same requirements as the obligatory offer.

Additional reporting and filing obligations might arise from antitrust regulations if the market share or the aggregate turnover in Ecuador exceeds the thresholds set forth in 2.4 Antitrust Regulations.

It is not possible for a company to introduce different rules or to alter the reporting thresholds. The reporting and filing thresholds are determined by law and cannot be altered or superseded in by-laws.

Derivative agreements for the purpose of acquiring the outstanding shares of a target company are feasible in Ecuador. However, given that most target companies are not listed, dealing in derivatives is not a common practice.

If the outstanding shares of a target company for which a derivative transaction is agreed exceeds the thresholds referred to in 4.2 Material Shareholding Disclosure Threshold, the derivative transaction must fulfil the same reporting and filing requirements as a tender offer. Likewise, if any of the thresholds set forth in 2.4 Antitrust Regulations are met, it is necessary to make the relevant disclosure to, and request the corresponding approval from, the Superintendence of Economic Competition.

When a tender offer is intended or necessary, as outlined in 4.2 Material Shareholding Disclosure Threshold, the bidder must issue an offering circular disclosing the purpose of the acquisition and explicitly set forth its intention regarding the future activity of the target company, and its plans with respect to the use of company assets and contemplated amendments to the by-laws, to the governing bodies, as well as its intention with respect to securities issued by the target company.

Regardless of the foregoing, if the transaction falls within the thresholds set forth in 4.2 Material Shareholding Disclosure Threshold, bidders will be required to disclose the purpose of the acquisition to the Superintendence of Economic Competition. In all other cases, such disclosure is not necessary.

If a tender offer is required as mentioned in 4.2 Material Shareholding Disclosure Threshold, the intention of the bidder must be disclosed simultaneously with the filing of the tender offer approval request before the regulators.

For the purposes of the Anti-Trust Law, the potential transaction must be disclosed to the Superintendence of Economic Competition as follows:

• within eight days following the day on which the boards of directors of the shareholders of the target company and the acquirer authorise entering into the share purchase agreement when the target company is not listed, and if any of the thresholds set forth in 2.4 Antitrust Regulations are met; and
• prior to the tender offer submission when the target company is listed.

Market practice on timing of disclosure usually follows legal requirements in connection therewith.

The scope of due diligence in a negotiated business combination usually includes corporate, labour, financial and tax matters, litigation, material contracts, organisational documents, operating licences and governmental permits and property.

Standstill agreements limiting the ability of the bidder to dispose of the shares of the target company are not usually demanded for non-listed companies and would not be applicable when the target company is listed. Exclusivity agreements, on the other hand, are quite common and are usually demanded by the potential acquirer prior to the issuance of its binding offer.

If a tender offer is required, the terms and conditions will be contained in the tender offer itself without the need for a separate agreement. If a tender offer is not required, it is common practice to document the terms and conditions of the acquisition in written agreements.

If the transaction refers to non-listed companies and the thresholds referred to in 2.4 Antitrust Regulations are not met, the process could last three to four months. If the transaction is subject to review or approval by the Superintendence of Economic Competition, such review or approval could take between five and nine additional months and the subsequent tender offer process around thirty business days.

The mandatory offer thresholds for listed companies are indicated in 4.2 Material Shareholding Disclosure Threshold. If the bidder intends to acquire 35% or more of the outstanding shares, the tender offer must be made for at least 50% thereof. If the bidder intends to acquire 51% or more of the outstanding shares, the tender offer must be made for 100% thereof.

When a tender offer is required, the consideration must be in cash. If a tender offer is not required, the parties can agree on a consideration other than cash, but cash is typically used as consideration as well. In the event that there is a value gap to be addressed, the parties usually revert to earn-out agreements, escrow agreements or similar arrangements.

If the target company is listed, the parties can agree on conditions precedent to filing the tender offer, provided such conditions do not contravene the Anti-Trust Law. The most common condition is to obtain the required governmental approvals, but business concerns can be addressed as well. Once the tender offer filing is approved by the Superintendence of Companies, Securities and Insurance, it becomes irrevocable.

The minimum acceptance condition is set forth in the tender offer. If the bidder intends to acquire 35% or more of the outstanding shares, the tender offer must be made for at least 50% thereof, but if the tendered shares represent less than 35% of the outstanding shares, the tender offer will be deemed terminated. Similarly, if the bidder intends to acquire 51% or more of the outstanding shares, the tender offer must be made for 100% thereof, but if the total proportion of tendered shares is below 51%, the tender offer shall be deemed terminated. Control is achieved by owning 50% + 1 share. However, certain corporate decisions may require a qualified majority, or even unanimity.

If a tender offer is required, the transaction cannot be conditioned upon the bidder obtaining financing. Furthermore, the bidder must provide an acceptable security, such as a standby letter of credit or a first demand guarantee for 100% of its offer. The bidder must disclose any potential indebtedness to be incurred by it, or by the target company, to finance the acquisition, but obtaining the financing cannot be a condition of the bidder’s obligations under the tender offer. If a tender offer is not necessary, a business combination can be conditional on the bidder obtaining financing.

If a tender offer is required, no security measures tending to impede, obstruct or encumber the right of the shareholders of the target company to accept competing offers can be included. If there are competing or concurrent offers, the bidder has the right to amend its initial tender offer so that it exceeds the terms and conditions of any subsequent offer.

When a tender offer is not required, the bidder usually seeks match rights and non-solicitation provisions. Even though they are permitted, break-up fees are not commonly requested.

The bidder can enter into shareholders’ agreements and/or negotiate the right to designate more members of the board of directors, veto rights or special majorities for certain decisions. Under Ecuadorean law, as long as the rights of the minority shareholders are not breached, shareholders can implement corporate governance arrangements to the satisfaction of the bidder.

Shareholders can vote by proxy provided that the authorised person is not a member of the management of the company or its controlling departments, nor one of the external auditors.

Ecuadorean law does not contemplate a squeeze-out mechanism as such. Under certain circumstances, the shareholder is entitled to withdraw but cannot be forced to sell its shares only because it did not accept the tender offer.

In transactions involving non-listed companies, the terms and conditions, including commitments to tender or vote by the principal shareholders, could be agreed by the parties, but this is not common practice. If the transaction involves a listed company, the parties can also enter into pre-arrangement agreements provided that such agreements do not include provisions tending to impede, obstruct or encumber the right of the shareholders of the target company to accept competing offers. A copy of such pre-arrangement agreements shall be annexed to the offering circular.

Once the bidder has decided to acquire the shares of the listed target company, it must simultaneously inform the target company, the Superintendence of Companies, Securities and Insurance, the Superintendence of Economic Competition and the stock exchanges of the terms and conditions of its tender offer. The bidder shall also issue a notice of publication indicating that the authorisation to carry on the tender offer will be requested from the Superintendence of Companies, Securities and Insurance within ten business days following the approval or non-objection of the Superintendence of Economic Competition. The disclosed information may be subject to changes and cannot be considered definitive.

If the business combination is between unlisted companies and neither of the thresholds referred to in 4.2 Material Shareholding Disclosure Threshold are met, disclosure of the issuance of shares is not required. If the target company is listed, then it must comply with the disclosure requirement set forth in 7.1 Making a Bid Public, but no separate or specific disclosure for the issuance of shares is required.

For the purposes of filing a request for approval of a tender offer, the bidder shall provide the Superintendence of Companies, Securities and Insurance with a copy of its financial statements for the last three years. Financial statements must comply with the International Financial Reporting Standards (IFRS).

The need to disclose the transaction documents in full depends on whether the transaction exceeds the thresholds referred to in 2.4 Antitrust Regulationsor involves listed companies. In such cases, the final draft of the transaction documents must be submitted in full to the Superintendence of Economic Competition in order to obtain the corresponding authorisation.

The primary duties of directors in a business combination are loyalty, due diligence, confidentiality, avoidance of conflicts of interest and non-competition. In the context of a merger or business combination, the duties of directors are owed to the company and its shareholders.

The establishment by the Board of Directors of special or ad hoc committees and/or the deferral of certain matters to such committees must be contemplated in the company’s by-laws. Such committees are usually implemented to address complex matters that require time-consuming in-depth analysis, such as those pertaining to business combinations, but nothing prevents the board of directors from delegating to the ad-hoc committee making decisions on the ordinary course of business or in matters in which a director has a conflict of interest.

In suits alleging a board of director’s violation of their duty of care, the court will uphold the board’s decisions provided that they have been made with sufficient, objective and reasonable information, and following an adequate procedure, unless there is hard evidence to the contrary.

In a business combination, independent outside legal, accounting, tax, asset valuation, environmental and expert appraisal services are commonly required by the board of directors.

In the Ecuadorean private sector, there have been very few cases where directors have been subject to judicial scrutiny. The fact that most large companies are family-owned contributes to the lack of judicial scrutiny regarding conflicts of interest.

Hostile tender offers are permitted in Ecuador, but due to the market size, they are not common.

Directors of listed companies are not allowed to implement defensive measures. From the moment at which the governing bodies are aware of a potential tender offer until the results thereof are published, directors must refrain from executing, or agreeing to execute, any act that is not in the ordinary course of business and that would in any way affect the tender offer process or favour one bidder over the other, such as issuing stocks or securities and entering into option or transfer agreements over assets.

Defensive measures subsequent to the governing bodies becoming aware of a potential tender offer are not allowed.

Defensive measures subsequent to the governing bodies becoming aware of a potential tender offer are not allowed.

Directors cannot take any action that prevents the tender offer from being fulfilled and/or a business combination from being implemented; they must act with absolute neutrality for the benefit of the company only.

Most M&A transactions have arbitration clauses that typically specify that the arbitration procedure shall be confidential. Thus, it is not possible to determine how common litigation is in connection with disputes amongst the parties. However, there have been lawsuits against the Superintendence of Economic Competition in connection with its denial of M&A transactions based upon competition concerns.

Most disputes related to mergers, acquisitions and share purchase transactions are handled through confidential arbitration. Therefore, it is not possible to define the stage in which litigation is most commonly brought.

Since most disputes related to mergers, acquisitions and share purchase transactions are handled through confidential arbitration, it is not possible to identify any lessons learned from disputes between parties with pending transactions.

Shareholder activism is not common, as the great majority of companies are not listed and, in most cases, are owned by close-knit economic groups. In Ecuador, activism is primarily focused on environmental and social matters in strategic sectors, rather than in M&A transactions.

There have been no cases of activists seeking to encourage companies to enter M&A transactions, spin-offs or major divestitures in Ecuador.

There have been no cases of activists seeking to interfere with the completion of announced transactions in Ecuador.