Due Diligence in Mexico

Investing in a Mexican business is one of the most significant investments that an individual can make in his/her lifetime. Completing a research called due diligence in Mexico is necessary before making any business decisions.

If you want to detect potential risks in the company you intend to purchase, you must run a due diligence process in Mexico. It is a process that identifies the risk of an adverse event that can occur within your business, such as loss of key staff, legal claims, market slumps, or default on payments, etc. If you know these factors of any company before purchasing it, you can make a much better decision regarding if you want to invest in such a company or not.

If you are buying a company and want to run a due diligence process in Mexico, you can rely on our experienced lawyers. Our Mexican lawyers can provide you with commercial, financial, and legal due diligence.

Real estate due diligence for foreigners in Mexico

As a foreigner, buying property might be challenging, but the support of the lawyers at our law office in Mexico can make it an easy task for you. However, if you are not a Mexican, you might overlook some factors that must be considered. For example, after purchasing the property, you might find out that the land was not authorized to be sold or the property had a construction lien against it. Our Mexican lawyers undertake a comprehensive and rigorous approach to due diligence in Mexico to protect foreigners from such frauds. Please find below how our lawyers in Mexico City ensures that this business is safe to invest:

• Review offers and sale contract;
• Our lawyers practice due diligence in Mexico to ensure that there is no claim against the property;
• Ensures that the property is not a part of an Ejido (agricultural land provided by the government to the Mexican people);
• Clarify if the owner has the right to sell the property;
• The property tax paid up to date;
• An official survey of the property (cadastral certificate);
• Proof of non-debt by water companies issued by AGUAKAN and CAPA;
• Proof of non-debt from municipal public works;
• Proper manifestation of renovations of the property.

All these legal services regarding the due diligence in Mexico will allow you to start a business with peace of mind without worrying about the possible threats. Our Mexican lawyers will evaluate if the concerned property or business is facing risks, and this will stop you from investing in the wrong place.

The due diligence process in Mexico

The due diligence process typically encompasses several key evaluations. Our specialized attorneys in Mexico recommend the following steps:

• Capitalization Analysis: This involves determining the overall size of the business, which is critical for understanding market capitalization, especially during stock evaluations, as it indicates possible volatility;
• Revenue and Profit Trends: Analyzing a company’s gross revenue, profit margins, and return on equity is essential to gauge its financial health and growth trajectory, particularly for investments in corporate bonds or equities;
• Competitor and Industry Assessment: An evaluation of competitors is crucial, as a company’s market position is influenced by its rivals. It is advisable to analyze two or three competitors to clarify the market potential for the company’s products;
• Valuation Metrics: This includes reviewing key ratios such as the price-to-earnings (P/E) ratio, price-to-earnings growth (PEG) ratio, and price-to-sales (P/S) ratio, among others.

As an additional step, our law firm in Mexico can provide more detailed information about other components of the due diligence process and assist in establishing a business in Mexico.

Who performs due diligence checks in Mexico?

Various professionals can carry out due diligence in Mexico, including:

• lawyers;
• equity research firms;
• fund managers;
• individual investors;
• risk analysts;
• broker-dealers.

Regardless of the situation—be it a merger or investment—conducting a due diligence check in Mexico is crucial for any business looking to safeguard its interests. Our law firm in Mexico offers comprehensive support for this process. In addition to the services related to due diligence, you can obtain the legal services of our lawyers regarding debt collection in Mexico.

Benefits of due diligence in Mexico

Engaging in due diligence in Mexico serves as a vital protective measure for businesses. Here are four key advantages:

• Reputation Management: Aligning with companies that have ethical, legal, or financial issues can harm your brand;
• Financial Protection: Partnering with financially dubious businesses can expose you to unexpected debts due to penalties or legal ramifications;
• Corruption Risk Mitigation: It’s essential to assess potential partners’ approaches to legislation, tax obligations, and anti-corruption measures;
• Economic Viability Assessments: Due diligence helps verify the capabilities of potential partners, ensuring they are a good fit for your business objectives.

Foreign direct investment data in Mexico

Mexico is the world’s ninth-largest foreign direct investment (FDI) recipient. The significant investments come from the United States, Germany, Canada, and Spain; etc. These foreign investments are redirected into various economic sectors. So, these investments must be made with due diligence in Mexico to avoid any possible hazards. This step will help attract more foreign investments and retain them in the country for more extended periods. Please check below the percentage of FDI in different sectors of Mexico in 2023:

• FDI of 50,1% was directed into manufacturing;
• 20% foreign direct investment was made into financial and insurance services;
• 6,3% FDI was directed into transport.

Besides due diligence in Mexico, you can also get more information about a variety of legal services offered by our lawyers, such as: immigration to Mexico, residence permits, debt collection and citizenship in Mexico. For example, after four years of continuous temporary residency, you can get a permanent residency permit in Mexico. This country also provides an option of citizenship by investment. If you choose to become a citizen of Mexico, you will get the power to vote, own property, and change your address or work without notifying the National Institute of Immigration (INM). If you plan to relocate to Mexico for good, you can also rely on our immigration lawyers. They will help you to obtain a visa by assisting you in the application and document submission process.

Consider contacting us if you need due diligence services in Mexico for your property or business. Our lawyers will provide you with comprehensive legal support in this regard.