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International Corporate / M&A - Mexico

International Corporate / M&A - Mexico

Published May 2023

Author

Jorge Benejam

Firm: DLA Piper México, S.C.
Country: Mexico

Practice Area: M&A

  • Paseo de los Tamarindos No. 400 A
    Piso 31, Bosques de las Lomas
    CDMX, 05120
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DLA Piper Mexico regularly represents major local and international clients in transactions to acquire assets in Mexico or corporate holdings in Mexican companies and offers substantial corporate experience to some of the largest companies and institutions on both their day-to-day obligations and their larger objectives. We have advised on and negotiated several successful acquisition transactions by Mexican and foreign corporations of Mexican assets or shareholdings and advised such corporations on the best way to structure their purchases and continue their corporate business relationship with their Mexican partners. 

Among our services we provide advice in (i) public and private M&A; (ii) divisional or asset sales; (iii) cross-border transactions; (iv) various joint ventures and strategic alliances; (v) conducting due diligence process; (vi) preparing MOUs; (vii) tax planning; (viii) obtaining governmental approvals (including antitrust clearance) and (ix) post-merger integration. 

We advise foreign investors on all phases of an M&A transaction, including but not limited to: preliminary agreements; due diligence; negotiations on Mexican legal matters, foreign investment issues and authorizations; preparation and negotiation of corresponding agreements (including all necessary ancillary agreements); review thereof if such are prepared by foreign counsel to coordinate inclusion of Mexican legal requirements; identifying business opportunities and potential Mexican partners; business plan design; regulatory strategy for Mexican companies in connection with their particular activities; antitrust aspects in connection with all matters associated with the activities of a Mexican corporation and periodic corporate maintenance of the acquired entities.

Our clients benefit from our practice in key business sectors: life sciences and healthcare, real estate, hospitality, media, telecommunications and technology, sports, energy and infrastructure, manufacturing, government, insurance, intellectual property and technology.

Our global platform encompasses 90+ offices in 40+ countries, and we offer 200 lawyers across Latin America. Hence, the breadth of the DLA Piper footprint enables us to serve all of our clients’ legal needs, whether they are based in Latin America or wish to do business there. DLA Piper clients benefit from a leading global M&A practice that, since 2005, has participated in more M&A transactions than any other law firm. Our experience allows us to execute cross-border global deals seamlessly while supporting clients across all stages of the transaction and offering cost-effective, pragmatic business solutions. Our clients benefit from our timely, pragmatic and efficient approach to problem solving that adds value to their business and enables transactions to come to a successful conclusion.

The legal system of Mexico follows the pattern of codified law based on the Napoleonic Code of France. The laws are generally contained in codes, both at Federal and State level. Most of the provisions which are relevant to a foreign investor, such as trading and other commercial matters, corporations, foreign investment, intellectual property, income tax, value added tax, transfer of technology, antitrust and labor are regulated by federal statutes. Mexican corporate matters are mainly regulated by the General Law of Commercial Companies, the Securities Market Law, the Commercial Code, and the Foreign Investment Law. 

Mexico offers several attractive alternate vehicles to foreign investors for doing business, either through the establishment of branch offices or through the incorporation of Mexican subsidiaries, which are regulated by the General Law of Commercial Companies. The most common commercial entities used in Mexico are the Stock Corporation (Sociedad Anónima) and the Limited Liability Corporation (Sociedad de Responsabilidad Limitada).

The Stock Corporation is a separate legal entity in which shareholders’ liability is limited to the payment of their respective capital contributions. Such capital contributions are represented by shares of stock which, as a general rule, are freely transferable. This type of entity offers flexibility for managerial purposes. The Limited Liability Corporation is a separate legal entity in which partners’ liability is limited to the payment of their respective equity contributions. Such contributions are represented by partnership interests, which are assignable by the affirmative vote of the majority of partnership interests with voting rights, that are properly represented in a partners’ meeting. 

Mexican legislation has minor unique complexities that differ to other countries, specifically, with respect to the restrictions of foreign investment. The Foreign Investment Law establishes, as a general rule, that foreign investors may freely acquire holdings in Mexican companies, engage in new lines of business or manufacture new products and open, expand and operate establishments except with the participation of foreign investment in specific sectors or activities, such as in the manufacturing of explosives, air transportation services, maritime navigation, fuels, among others.

Mexico is recovering from a pandemic that has had a profound economic and social impact. Despite the global economic problems, the strong macroeconomic policy framework of Mexico has safeguarded macroeconomic stability. The minimal devaluation of the Mexican peso, in the face of global problems, has encouraged the participation of foreign investment in the country. In such respect, major international companies are interested in Mexico, requiring our specialized legal advice across the spectrum of transactional and regulatory legal requirements, including advising on establishing subsidiaries in Mexico.

During the suspension of activities during the Covid-19 pandemic, we helped our clients carry out cross-border transactions that helped them position themselves in the international market, overcoming very challenging problems, such as the closure of borders and authorities.

Covid-19’s impact in Mexico was remarkable, it affected all economic and social sectors; however, the commercial activity never stopped, and during this year it started to return to prior levels. Obviously due to the disruption caused by the lock-down M&A activity was somewhat reduced. However, since 2021, it has shown a remarkable recovery. I believe that the pace we have been observing in the past year will prevail at least during the next year. Given that 2024 is an electoral year in Mexico, the market may slow to some extent, due to the natural speculations surrounding the Federal elections.

Definitively, global economic and political problems have affected M&A activity; however, the market has recover substantially in the past year. The potential world-wide economic recession and a possible depreciation of the local currencies in emerging markets (as Mexico), due to the recent increases in interest rates in developed economies, may have an impact on regular M&A activity, though it may open other doors, especially for Private Equity firms, to acquire assets in emerging markets, at a reasonable prices.  

Technology, industrial and pharmaceutical sectors have experienced the most deal activity in my experience. The foregoing, derived from the technological advances and the new social vision, which was developed as a result of the pandemic.

Undoubtedly, we have continued to work lately with large firms, however, SMEs have been positioning themselves in the Mexican market in recent years.

We provide advice to entrepreneurs, from all kinds of required specialties, since we have all kinds of legal practice areas to assist them not only with the set-up of their operations but to assist them in any regulatory matters that they may require to successfully enter into the Mexican market.  

We offer full-service business legal counsel to domestic and multinational companies with interests in and operations throughout the world. Our integrated approach to serving clients combines local knowledge with the resources of the DLA Piper global platform. With over 400 lawyers practicing throughout Argentina, Brazil, Colombia, Chile, Mexico, Peru, and Puerto Rico, our teams frequently work with our professionals throughout the LatAm region, Iberian Peninsula, and around the globe to ensure our clients receive the depth of service they require to meet their legal and business objectives. DLA Piper’s global platform of 90+ offices in more than 40 countries enables us to serve all of our clients’ legal needs, whether they are based in Latin America or wish to do business there. Likewise, we are especially active in network events, making them known mainly on social media.

We do not expect reforms in relation to corporate law in the near future.

When starting a business, or expanding the operations of a business internationally, it is necessary to have a highly specialized legal team prepared in these areas, with an international focus and platform, which is why DLA Piper Mexico is the best option.

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