Integration Key for Automotive Development

Q: How open have Mexican companies been to M&As as a way of growing their position in the automotive industry?
A: Companies are gradually embracing this, understanding it is a global practice. Suppliers are constantly forming new partnerships but even OEMs are merging their operations, resulting in larger consortiums. One of the most popular mergers between suppliers in recent years was between ZF and TRW. Several of our clients in the automotive industry have successfully used M&A transactions as a way to expand and grow their business.
Collaborations are forming both vertically and horizontally. Integrations between clients and their suppliers provide more certainty regarding component availability and both companies can boost their cost-competitiveness through implementation of better practices and similar technology. Mexican companies can take advantage of their global partners’ experience and also have a lot to offer to a growing global supply chain.
Q: What are the biggest challenges in terms of regulations for companies to implement M&As effectively?
A: For the past 30 years, Mexico has had an open market for M&As. Recent federal administrations in particular have been concerned about attracting foreign investment and that has prompted alliances in different sectors including automotive.
One of the main challenges we face is maintaining a healthy competition environment. We now have a modern regulator in the Federal Commission of Economic Competition (COFECE), which has been meticulous in ensuring the end consumer is not impacted negatively by company integrations. Having said that, I still see an opportunity for more automotive companies to collaborate and form new integrations in Mexico.
Companies in Mexico must be open to receiving capital from foreign investors, but Mexican companies should also continue to invest in other regions like Europe and Asia. Some players are already leading companies in the country and have now been growing beyond Mexico’s borders.
Q: Considering the opportunities that still exist for M&As, how can Santamarina + Steta help companies in these processes?
A: We support our clients using an integral approach. As a full–service law firm, we are able to assist our clients in a wide array of legal matters including M&A, corporate, litigation, tax, labor, environmental, real estate and intellectual property. We participate from the strategic planning of the project and the due diligence to the establishment of the purchase agreement and the authorization processes with the different governmental authorities and economic competition agencies. At the same time, we offer clients the advantage of collaborating with our network of independent firms across the globe. These partners are distinguished by the high-quality standards of their employees and their status as full-service firms. All are leaders in their countries and genuine experts in the local business community, authorities, laws and practices.
Q: What are the main challenges that both national producers and importers face to reach their goals?
A: Changes to NAFTA will definitely impact the industry, but Mexico has a solid economy and a strong industry to help it wade through these challenges. The country has received investment from many regions besides the US and companies will be able to sort any obstacles, albeit suffering from the natural cycles this will entail.
Even though the domestic market contracted, production and exports continue to grow. Mexico is the third-largest exporter in light vehicles according to AMIA and our priority now should be to maintain that position and advance it as much as possible. NAFTA will remain our main market but we should export to new regions. The country, however, should not neglect domestic sales and the government should push for the integration of new automotive technologies such as hybrid and electric models.