MEXICO Law and Practice Contributed by: Gabriel Robles, Héctor Cárdenas, Eric Silberstein and Eduardo Aiza, Ritch Mueller
backed investment, the latter naturally undergoes a higher degree of scrutiny. EU FSR Regime The EU FSR Regime is not really applicable in Mex - ico. This regime could be related to a transaction in Mexico to the extent that a private equity fund from a European jurisdiction is participating. Here, the bur - den would be on such participant to comply with the additional scrutiny in Europe. At this point, this is not likely to be of material relevance to the private equity sector in Mexico. Anti-Bribery and ESG – Recent Developments While not a specific development, over the last 12 months more anti-bribery investigations have been conducted and it appears that the related laws are being and will be more strictly applied and enforced. This, in addition to the more comprehensive due dili - gence process, is resulting in private equity portfolio companies having to implement and enforce harsher and stricter compliance policies, as well as compli - ance by all members of the company. ESG continues to be a trending topic worldwide and Mexico is no exception. Both government authorities and the market in general are scrutinising investments, issuances and day-to-day operations to consider ESG practices. Private equity is no exception to the forego - ing, and investments are being scrutinised to ensure that they include an ESG component. Generally, investors ask for a full and extensive due diligence review with a view to producing a red flag report (ie, highlighting key findings in respect of items requiring either some action or special considera - tion and identified contingencies). However, there are instances where investors require a full due diligence report which includes full descriptions of all legal aspects of a target company, including templates identifying the main provisions of diverse legal docu - ments executed by the target. 4. Due Diligence 4.1 General Information
Due diligence is not limited to reviewing documents. It comprises other activities, such as available public independent searches (ie, public registries), site visits, management presentations conducted by the target, and Q&A processes with relevant officers of the target. As mentioned before, a legal due diligence is a com - prehensive process as it focuses on all relevant areas; however, focus and detailed review may vary based on the industry and operations conducted by the target. Key Areas Covered by Standard Legal Due Diligence The following are the key areas covered by a standard legal due diligence in Mexico: • corporate; • material agreements; • real estate matters; • financing matters; • environmental and other regulatory matters; • labour and employment matters; • intellectual property; • compliance (including anti-bribery and anti-money laundering); • litigation; • tax matters; • data privacy; and • insurance. Additionally, in Mexico, the use of representations and warranties (R&W) insurance is less common than in other jurisdictions. While some players are currently making an effort to implement it, the number of excep - tions and exclusions for Mexico result in lower use of the product. Consequently, the legal due diligence report becomes not only a key element for under - standing the target’s business and deciding whether to move forward with the proposed transaction, but also plays a fundamental role in negotiating the under - lying M&A agreement. This is particularly relevant with respect to representations and warranties, and indem - nification clauses. 4.2 Vendor Due Diligence Vendor due diligence has proved to be a valuable resource for conducting due diligence processes in the context of a bid; however, this trend and market
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