Mexico is the second largest investment attracted country in Latin America after Brazil. The proximity to the USA, the special relationship of these two countries within the framework of the North American Free Trade Agreement (NAFTA), and the strategic geographic location make it an attractive country for investment in many areas, in particular in manufacturing.
If you are planning to acquire a manufacturing company in Mexico, then our information may be of interest to you.
This blog post will cover some of the specifics of M&A transactions in Mexico and their regulation. For example, Mexican law allows for both voluntary and forced takeovers.
If the takeover is compulsory, then the board's position can only be neutrally observant. Of course, it can express its opinion on the fairness of the proposed price, but it is unlikely to be able to prevent the conclusion of a deal to buy and sell a private company in Mexico.
Company sale&purchase transactions in Mexico: restrictions and penalties
The Mexican M&A market is quite liberal when viewed through the eyes of a European buyer. For example, the use of penalties in M&A transactions in Mexico is not regulated in any way, so the parties to the transaction are free to apply penalties or similar mechanisms in takeover agreements if the transaction is not carried out (break-out fees). Curiously, the parties are also free to use mechanisms designed to confuse additional bidders. At the same time, state bodies cannot interfere in this process in any way.
If you are looking to do a private M&A deal in Mexico, it is worth considering that there are no restrictions on the offer to close the deal. The business can be combined in any way the parties want, provided that the transaction does not contradict the law, ethics or public order.
Mexico M&A and financial documents are usually processed at the same time. The seller must obtain sufficient assurance from the financing organization that payments will be made at the close of the transaction. The deal itself should be closed on condition that the acquisition of a private company in Mexico is paid in full. The seller is obliged to provide the funding organization with all the necessary information and documentation and to allow the company to obtain prior approval for funding.
M&A deal in Mexico: displacement of minority shareholders
Minority shareholders in Mexico are protected and crowding out is basically impossible. However, loopholes can always be found. For example, shareholders of public companies can draw up special corporate regulations that could lead to the ousting of minority shareholders. This can also be done by approving the capital increase at a shareholders meeting. However, all shareholders have a pre-emptive right to acquire shares in a private company in Mexico. Shareholders must exercise this right very quickly, otherwise other shareholders will rush to exercise this right.
NOTE: International transactions are allowed. To do this, you need to apply for permission to conduct an international M&A transaction in Mexico.
Mexico M&A deals: objections
The acquisition of a private company in Mexico is effective within 3 months of the completion of registration with the regulatory authority. During this period, any creditor of the merging companies may object to the merger by filing a complaint with a competent court. In this case, the merger will be suspended pending clarification of the circumstances and making a final decision.
Experts of our company will advise on the regulation of business sale and purchase transactions in Mexico and answer all your questions. Reach out to us by filling the feedback form below.