Defending Automotive Industry DevelopmentFri, 09/01/2017 - 10:35
Growing inorganically in any industry through mergers and acquisitions means navigating a labyrinth of international law. Corporate mergers can encroach on technology development, financial and strategic planning, guarantees and authorization processes, says lawyer Jorge Barrero, of Santamarina + Steta. But alliances feed growth, especially when rapid technology development is needed, he adds.
“The Chinese strategy for entering a new market is a clear example,” Barrero says. “Chinese companies have now carried out acquisitions in places like Canada and Germany. When expanding abroad they look for international businesses with a presence in other countries and have consistently gained the technology they need through mergers and acquisitions.” Case in point: China’s BAIC group, which Fortune magazine ranks 13th in the global automotive industry, entered Mexico by leaning on distributor Grupo Picacho to begin selling its cars.
Barrero sees M&A as Mexico’s road to deeper involvement in the automotive production chain. Limited R&D investments in Mexico hinder the country’s global competitiveness but Barrero also sees an opportunity for Mexican companies to improve their competitiveness. “Local companies could take more advantage of joint ventures with investments from large multinational players to build and strengthen their technological skills,” he says. Although Mexico has taken great strides to become more competitive, there are many inconsistencies regarding support for local and international companies. “There is an excess of regulations covering imports and exports, in part because some players have abused of fiscal incentives used to support industry participants in the past.” This over-regulation makes crossing the border with goods time-consuming and costly.
Santamarina + Steta, celebrating its 70th anniversary, provides legal representation to companies facing all sorts of legal issues from their creation, all the way their business consolidation. The firm has been an important part of the automotive sector, with some client relationships now exceeding 50 years, says Barrero. Santamarina + Steta has locations in Mexico City, Monterrey and Queretaro, giving it a presence in the largest and most influential automotive and industrial hubs. “We are a full-service law firm with a longstanding international scope and tradition,” says Barrero, who represents clients entering the market through acquisitions or starting greenfield projects, including property acquisitions, facility lease or construction, obtainment of government incentives and securing of permits and licenses.
Working in such a diverse market and across several countries gives the firm a global perspective of the industry. This means its team understands the trends, business cycles, weaknesses and concerns of industry players, becoming experts in the supply of raw materials, parts and components, Barrero says. The experience they have acquired over the years working in international transactions and their best practices come in handy while providing advice and during negotiations, whether defending or arguing a patent or trademark or in strategically planning the obtaining of clearance for projects by collaborating with authorities in several countries.
Barrero highlights Grupo Industrial Saltillo (GIS), a client the firm has supported for many years, during and after its initial public offering more than 40 years ago. Recently, the group has grown vigorously through mergers, acquisitions and joint ventures. One of its most successful joint ventures was a project with TRW (now ZF TRW) producing cast iron parts for brake systems. GIS later worked with Fagor Ederlan, a large Spanish cooperative in an equal-participation partnership focused on machining of auto parts. At the end of 2015, GIS completed a friendly takeover of a Polish publicly-traded company with plants in Spain, Poland and Czech Republic through a public offering. It not only received the base operations but also the company’s management team and its knowledge of the European market. In December 2016, GIS acquired Grupo Infun, a Spanish company operating six facilities across Spain, Italy and China. “In addition to taking advantage of all the experience and knowledge Santamarina + Steta has in Mexico, GIS also benefitted from the firm’s unique global platforms and business collaborations, which allowed it to rely on Santamarina + Steta as a one-stop shop, by securing legal support in other jurisdictions, working seamlessly as a single firm,” says Barrero.