Not every successful M&A ends with a signed contract. Sometimes the best deal is the one you don't make.
An internet provider in Minas Gerais, with revenue of R$ 1.5 million a month, was expanding fast and asked Vispe Capital to lead its growth through acquisitions. The goal was to find and buy competitors with operational synergy and an immediate gain in subscribers.
The challenge
Vispe scouted the market and filtered for operations that fit the client's profile. With one of them, talks moved forward: based on the data the seller provided, the parties agreed on a value, and the seller accepted a non-binding offer of R$ 10 million, about 6 times EBITDA.
In due diligence, the team dug into the accounting books, labor obligations, pole-sharing contracts and tax compliance. And the "healthy" picture presented at the start didn't hold up. The audit found unprovisioned tax and labor debts and problems regularizing the infrastructure that could lead to heavy fines in the short term. Together, the liabilities and contingencies exceeded the purchase price itself.
Going ahead would have been what the market calls "buying a problem wrapped as a gift." Instead of the new business generating cash to pay for the investment, the buyer would have to take money from its core operation to pay off the debts of the company it had just bought.
How Vispe worked
The provider market in Brazil was, and still is, consolidating rapidly, with attractive multiples and credit available for M&A. It was tempting to close quickly. But in this case, Vispe's role stopped being to make a purchase happen and became to protect the client's capital.
The strategy started from one principle: don't take the seller's data as absolute truth. In provider deals, it's common to mask liabilities to inflate the valuation. The audit cross-checked operating data, such as real subscribers, against tax and regulatory obligations that didn't appear in the picture presented.
The biggest obstacle was the lack of transparency. The team had to find records of labor liabilities, such as unregistered employees and unpaid overtime, and irregular use of poles, none of which appeared on the official balance sheet. The seller presented attractive revenue, but didn't account for the fines and contingencies that revenue generated by being non-compliant.
In the provider sector, value is usually calculated only on EBITDA or on the number of subscribers. The technical edge was seeing the hidden infrastructure debt and the regulatory liabilities that don't appear on the balance sheet. The final step was to prove the deal didn't work mathematically: after accounting for the liabilities, the "adjusted price" was negative.
The results
- Agreed price (non-binding offer): R$ 10 million.
- Liabilities and contingencies found: more than R$ 12 million.
- The company's real value: R$ -2 million.
- Process duration: 3 months.
With these numbers, the client walked away safely and without regret, based on data rather than assumptions. Besides preserving capital, it kept its leadership from spending the next two years putting out operational and legal fires. That time went into organic growth and the search for healthy targets.
What changed
Before, the buyer was about to turn R$ 10 million into R$ 12 million of debt, with a decision based on enthusiasm and surface-level data. Afterwards, it preserved that capital for healthy investments and began buying on technical grounds, with Vispe's methodology built into its M&A decisions.