When doing business in Guatemala, managing your business’ risks with due diligence practices is essential to its success and longevity.
Language and/or cultural barriers, understanding the market and the way of handling businesses are challenges that foreign business owners face when expanding abroad. Buying existing companies or partnering with locals are key ways to reduce these challenges and get support navigating an unfamiliar market.
However, it’s imperative to protect yourself when undertaking either of these processes by conducting thorough due diligence checks in Guatemala of the companies and people you will surround yourself with.
Find out more about due diligence in Guatemala and how to manage your business risks.
What is due diligence in Guatemala?
Due diligence refers to the process of thoroughly reviewing and analyzing available information of a company. The focus of this analysis is primarily set on economic, legal, tax and financial circumstances of a company.
What is the purpose of due diligence?
The general purpose of due diligence is to conduct a risk assessment as part of the process of buying a company, hiring new staff or partnering with other organizations. However, conducting due diligence in Guatemala brings more advantages.
The main objectives of a due diligence analysis are:
- Reduction of information asymmetries between buyer and seller
- Establishing a basis of trust between buyer and seller through transparency
- Analysis of the opportunities and risks of the purchase
- Identification of possible future synergy potential
- Creation of a numerical and data basis for the purchase price negotiation
- Find starting points for meaningful company valuation
- Hiring staff or making statutory appointments (background checks)
- Partnering with another company to do business together
Who can carry out due diligence?
Due diligence is generally carried out by experts lawyers and consultants as a third party to the company itself. Various sources of information are used in the course of this examination, including analyzing company documents and data and holding discussions with the management of the target company.
Due diligence contains several different sub-areas, of which the most important areas are:
- Financial due diligence
- Market or Commercial due diligence
- Legal due diligence
- Tax due diligence
In addition, forms of cultural, technical, employee-related and environmental due diligence are becoming increasingly important.
The process takes place primarily before the conclusion of a company’s purchase contract. Due diligence usually finds its place in the field of mergers and acquisition.
Why is Due Diligence important in Guatemala?
Doing business in Guatemala brings many advantages. According to globaledge, some of the most significant benefits are:
- Financial support from the US and multilateral lenders
- Free trade agreements with the US and EU
- Geographic proximity to the US and Mexico
- High potential for tourism, agriculture (bananas, coffee, sugar), mining, hydroelectric and geothermal energy
However, the country is still facing some macroeconomic challenges which represent possible risks for business owners. Some challenges can include:
- Social and political instability
- Poor infrastructure
- Vulnerable to external shocks (natural disasters and commodity prices)
- Heavily reliant on low value-added industry and expatriate remittances
- Low fiscal revenues
- Rural poverty, inequalities, under-employment, informal economy, ethnic divisions
- Security issues
As a result, it is strongly recommended to get advice from experienced specialist lawyers and consultants who support you with due diligence procedures as part of risk management.
Get support from trusted experts to carry out due diligence in Guatemala
Protect your company from non-compliance and other potential risks by seeking out due diligence services in Guatemala from a trusted team. Engage with a local multilingual team experienced in conducting thorough checks on company and employment circumstances in Guatemala, so you can make informed decisions about your business venture.
At Biz Latin Hub, our team of bilingual professionals in Guatemala have the knowledge and experience in due diligence reviews to ensure your company is protected while it makes new connections in Guatemala. We support new market entrants and existing companies looking to acquire new businesses or hire new staff.
Get in touch here now to manage your business risks in Guatemala.
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