Getting to grips with merger and acquisition (M&A) due diligence in Mexico is essential for any investor or foreign company looking to enter this massive North American market by purchasing or partnering with an established local entity.
Due diligence processes involve analyzing a potential commercial partner prior to doing business with them, in order to verify their financial wellbeing and historic compliance with local legislation and regulations.
Read on to understand more about what M&A due diligence in Mexico is, and what types of due diligence are carried out in the North American nation — Latin America’s second-largest economy by gross domestic product (GDP).
What is M&A due diligence in Mexico?
Once you have found a reliable legal representative in Mexico to manage your merger or acquisition process, you will need to conduct due diligence on the company you are doing business with.
M&A due diligence in Mexico involves a thorough investigation of the potential partner company’s financial, legal, and employment dealings, with the aim of identifying any inappropriate practice and eliminating potential business risks. During this process, a large amount of information is analyzed to confirm information that has been legally declared by the company, in order to inform the investor’s decision prior to agreeing to any kind of transaction.
As such, due diligence will identify liabilities that may otherwise not have been obvious and could affect the value of the transaction being negotiated. By conducting a comprehensive M&A due diligence report, you can rest assured that you are making a sound investment at the right price.
Types of M&A due diligence processes
Foreign investors usually consider it more important to perform due diligence on a company’s financial and legal records. However, there are other areas of a business that may require a professional examination. Due diligence in Mexico can include:
Legal due diligence focuses mainly on the legal situation of the company. Legal due diligence analyzes contracts with third parties and company documentation, as well as identifying potential litigation risks. It can also include issues related to trademarks and patents.
Labor due diligence examines labor conditions and practices to understand the relationship the company has with its employees and social security authorities.
Financial due diligence reviews the financial records of the company and ensures that future profits are sustainable. Note that it not only analyzes the historical financial performance of a company, but also examines its viability, the possibility of indebtedness, and its liquidity.
Manage your business risks with the help of Biz Latin Hub
At Biz Latin Hub, our team of multilingual due diligence specialists has broad experience undertaking a thorough examination of corporate entities, helping you to detect hidden risks prior to making an investment and make the best decisions when expanding your business in Mexico.
Contact us now for more information and to receive personalized assistance.
Learn more about our team and expert authors