Insights in Asset Management for Companies Doing Business in Mexico

In this third article in our series focused on best practices for businesses nearshoring in Mexico, we discuss a range of important considerations associated with ensuring effective asset management design and implementation. 

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Steve Katz  00:16

Hi everybody, and thanks for listening in on our Hilco Global Smarter Perspective podcast. I'm your host, Steve Katz. And we're glad you could tune in today, we're going to be discussing the intricacies of effective asset management for companies currently or considering nearshoring manufacturing in the Mexico market. This is part three in a series of topics that we've been covering on doing business in Mexico. And joining us, once again, for today's discussion is our friend Jan Rene Aguirre. He's director of business development and turnaround strategy at Hilco Global Mexico. And we're really glad to have him back on. Jan welcome back. 

Jan Rene Aguirre  00:50

Hi, Steve, it's great to be back. 

Steve Katz  00:53

Alright, well, we're glad to have you. And as I said, this is our third conversation designed to help inform companies about nearshoring in Mexico or those companies who are either doing so or considering doing so. And so far, we've covered some of the core pitfalls that companies run into in general, when they are nearshoring in that country. And there are a lot of intricacies involved in mergers and acquisition activities in the country. We talked about that. I guess my first question to get us going today, since our topic is asset management. Why did you choose that topic as our as the next most important topic in our series? 

Jan Rene Aguirre  01:30

Absolutely. And listen, thanks for having me back, Steve. 

Steve Katz  01:35

Yeah, absolutely. 

Jan Rene Aguirre  01:36

When we talk about asset management, we're delving into a world of effectively valuing a company's assets, and underlying the optimal strategies for monetizing them or lending against them as collaterals. Now, why did we choose these as our third topic? Well, because in the context of nearshoring in Mexico, managing assets takes on a distinctive flavor compared to the US or other parts in the world. You see, it's not just about identifying and tagging assets, it's about recognizing the unique circumstances and challenges that come with doing business in Mexico. The landscape here is dynamic and businesses need to navigate it with a nuanced understanding of the local environment. Asset management becomes critical, because it's not just a one size fits all situation. 

Steve Katz  02:22

Okay, so let's, let's talk a little bit more about that. So when you say it's not, it's not one size fits all, what what do you mean? 

Jan Rene Aguirre  02:29

Sure, sure, Steve. In Mexico, effective asset management means staying on top of regular identification, evaluation, and management of companies diverse assets. Whether it's equipment, intellectual property, or other tangible and intangible resources understanding their worth is key. And when it comes to monetization, the strategies employed must be tailor made to the specific conditions prevailing in Mexico. This is where the rubber meets the road actually, knowing when and how to leverage your assets under a variety of circumstances are unique to these markets. So our choice of asset management as a third topic, stems from its fundamental importance in the nearshoring landscape. It's not just about avoiding pitfalls, or navigating the M&A intricacies, but it's just also about ensuring the company's assets are not just identified and tagged but actively managed and optimized properly.

Steve Katz  03:26

So obviously, a lot of sort of specific types of considerations, if certainly for any market, but in Mexico, perhaps more than some of the others. You know, there's a lot going on from an economic perspective right now that might be impacting the business environment in Mexico. Can you tell us about that? 

Jan Rene Aguirre  03:49

Absolutely. First off, consider the current economic and business environment in Mexico. It's dynamic, to say the least.  Frequent and precise valuations would help businesses stay agile and respond effectively to the ever changing market conditions. With Mexico's diverse economic landscape encompassing industries like automotive, manufacturing, electronics and aerospace, specific valuations will enable businesses to align their strategies with sector specific demands and opportunities. Now, let's talk about key industries attracting foreign investment. As you might be aware, Steve, Mexico is a hotspot for various sectors. Take the automotive industry, for instance, it's a major player with multinational companies establishing their presence. Here asset management, tailored to these industries ensures that these businesses are strategically leveraging their resources for maximum impact, be it in manufacturing, technology, or even the energy sectors. 

Steve Katz  04:52

What about and we talked in the past about some of the business regulations and how that impacts efforts how about, you know pertaining to what we're talking about here?

Jan Rene Aguirre  05:00

Sure, sure. Moving on to the legal and regulatory framework, I agree it's a critical piece for the puzzle, right? You're navigating foreign businesses regulations can be tricky, and in Mexico it's not an exception. Asset management here requires a nuanced understanding of the legal landscape to ensure compliance and minimize risks. Especially given the impact of recent regulatory changes on sectors like energy and telecommunication. So Steve, in a nutshell, regular and accurate valuations coupled with a methodical and globally minded approach to management and potential monetization of such assets are not just best practices. I would say that they're essentially in the Mexican context. It's also about adapting to these unique economic conditions, aligning with key industries, such as automotive, electronics and energy, and navigating the legal intricacies to ensure that asset management is a strategic advantage for businesses in Mexico. 

Steve Katz  06:01

Great, really great foundation for the discussion today. I know you talked often about the, what you call the Mexico fundamentals when it comes to asset valuation. So can we dig into that a little bit, starting with what it takes to be able to make truly well informed decisions using those fundamentals? 

Jan Rene Aguirre  06:21

Certainly. Imagine a business looking to expand its operation in Mexico or a lender considering providing financing. Without a clear understanding of the appraised value of the assets, these decisions become akin to navigating in the dark basically. So businesses need accurate valuations to determine their financial health, plan for expansion, or make strategic investments. Lenders, on the other hand, rely on the appraised value of the assets to assess the collaterals worth and make informed lending decisions. Now, let's talk about the methodologies used in these asset valuations and their relevance. Various approaches can be included, including a cost, market, and income based methods are employed in different circumstances. Each of these methods might hold significance based on the nature of the assets. For instance, in the real estate sector, the market approach might be crucial, while the income approach will be more relevant in assessing the value of let's say, intellectual property. Right. So understanding and applying these methodologies correctly, is paramount for delivering accurate and meaningful valuations to companies.

Steve Katz  07:39

Okay, great. Keep going.

Jan Rene Aguirre  07:42

Perfect. Now, when we want to mention challenges, specific challenges, in the Mexican market here the valuation landscape has its own nuances. Factors like regulatory changes, cultural considerations, and industry specific challenges can impact the accuracy of the valuations at certain point in time. 

Steve Katz  08:04

Yeah. 

Jan Rene Aguirre  08:05

Additionally, I would say, Steve, that in Mexico, the real estate market, driven by factors like urbanization and infrastructure development, poses unique challenges that demand a deeper understanding of local dynamics. 

Steve Katz  08:19

Yeah, that, you know, I'm guessing that could even be an entirely separate conversation, because that's pretty there's a lot there. 

Jan Rene Aguirre  08:26

Yeah, definitely. So, in essence, making well informed decisions require not only a grasp, of global best practices in asset valuation, but also a nuanced understanding of the specific challenges posed by the Mexican market. I would say it's about aligning businesses strategies, and lending decisions with that intricacies of the local landscape, but at the same time, ensuring that the appraised assets values from a solid foundation for informed and successful moves.

Steve Katz  09:02

Okay, good. And, you know, the monetization piece is obviously critical. Do you find that companies that are doing business in Mexico are looking to do so really understand that when it comes to unlocking the value of, you know, their equipment and other types of assets that the market is different than any other they may have tried to navigate in the past, and that requires a distinct strategy?

Jan Rene Aguirre  09:28

It's a great question, Steve. And I would say, the reality is, most companies don't realize this until they face the challenges. Where they often fall short is not understanding that monetization strategies need to be part of the strategy from day one. When nearshoring in Mexico, it significantly influences both valuation and conservation. For example, nearshoring in Mexico introduces unique dynamics to the equation. Companies must recognize the value of their assets and may differ due to regional market conditions, industry trends, and even cultural considerations. So their strategy for unlocking these value requires a keen understanding of the value of the assets that you currently hold, but at the same time the Mexican business landscape. Now, let's touch on the key approaches suitable for the Mexico market. 

Steve Katz  10:20

Great.

Jan Rene Aguirre  10:21

I would say that first, partnerships and collaborations need to be pivotal. Understanding the local market, building relationships with potential buyers or partners and tapping into that supply chain ecosystems can ensure the effectiveness of asset monetization strategies. Second, flexibility is key, right? The Mexican market is diverse. And what works in one industry or in one country might not work or translate to another. Being adaptable and tailoring monetization approaches to specific industry and assets needs is crucial for success. 

Steve Katz  11:01

Do you have any tangible examples and you know, not not detailed case studies, but maybe just touch on a couple examples of that?

Jan Rene Aguirre  11:10

For sure, Steve, let's discuss two brief Mexico case stories that came to mind and illustrate successful monetization dependent on effective valuation. In the manufacturing sector, a company successfully leveraged its machinery assets by understanding the demand in the local market and forming strategic partnerships. In the technology sector, another company effectively monetized its intellectual property by navigating the legal and regulatory landscape, aligning with the local market trends. These cases highlight the importance of integrating monetization into the overall business strategy from day one. And understanding that these things requirements of the Mexican market for both valuation and successful asset monetization. 

Steve Katz  11:59

That's great info. And when you work with companies like that, that are nearshoring in Mexico, what tips and best practices do you and the team at Hilco Global Mexico try to install into those organizations to help ensure their success moving ahead?

Jan Rene Aguirre  12:13

Yeah, well, it's a crucial aspect of our approach. And I'm really glad that you actually brought it up. When it comes to asset management in Mexico, there are several best practices that can make significant difference for US companies navigating this dynamic landscape. Firstly, understanding the local market is paramount. It's not just about knowing the industry trends, but really grasping the cultural nuances and business practices specific to the Mexican market and also to the to the region that they're operating in. Incorporating this understanding into asset management strategies is key to success. Secondly, as mentioned before, flexibility is a recurring theme. Given the diverse nature of the Mexican market, adopting flexible approaches to asset valuation and monetization ensures that strategies can be tailored to the unique needs of different industries and different situations.

Steve Katz  13:12

Yeah, that makes a lot of sense.

Jan Rene Aguirre  13:14

Now, here's a crucial tip for navigating the market effectively. Consider partnering with a local or firm. Having a local connection provides invaluable insights into the regulatory landscape, market trends and potential challenges. It's not just about reinventing the wheel, it's, I would say it's also about leveraging local expertise to announce your strategic decision making. There's a famous saying here, it's a know how and know who. Right? And having the right partner makes a difference. 

Steve Katz  13:48

Absolutely.

Jan Rene Aguirre  13:50

So I will dive into this. And I like introducing the idea of partnering with a local expert or firm may sound self serving, but it's a genuine recommendation. Whether it's navigating legal intricacies, building key industry relationships, or just understanding the local business ecosystems, having a local partner can be a game changer for any US company considering or actually implementing nearshoring strategies in Mexico. 

Steve Katz  14:23

I think, not to interrupt you, but I think, you know, you say that it may sound self serving, but I mean, it's it's a, it's a genuine need to have some, you know, from the inside, who understands the intricacies of how everything works, when you talk about the know how, and know who, you know. It's one thing to understand what to do, but to understand how to get it done by, you know, having the connections and the people, you know, across the country that you've worked with in the past successfully that you can trust. That's a that's a big factor. Right? 

Jan Rene Aguirre  14:54

Definitely. And I mean, I think everybody can agree here that when doing business internationally, This recommendation would not only apply to Mexico, but to anywhere in the world having a local partner. It really is a game changer, Steve. 

Steve Katz  15:10

Yes. 

Jan Rene Aguirre  15:10

So in summary, I mean, I would say these best practices for asset management in Mexico involve understanding the market intricacies, embracing flexibility and seriously, again, considering the benefits of partnering with a local expert. It's about combining these global best practices with a local insights that you can get for for a better and holistic and effective approach to asset management. 

Steve Katz  15:37

Yeah, I think that's the key. The key piece those two those two pieces working together. Absolutely. Well, Jan, we are, unfortunately, running out of time. But is there anything else before we wrap up that you wanted to share?

Jan Rene Aguirre  15:53

Absolutely, Steve. To summarize, it's crucial for businesses to have a keen eye on the road ahead in the Mexican market. What we're witnessing and what's already unfolding, pose both challenges and opportunities. The current economic landscape, marked by shifts in the global trade dynamics and regulatory changes, adds a layer of complexity that businesses must navigate. So looking forward, what we anticipate at Hilco Mexico are challenges stemming from evolving trade dynamics and technological disruptions. The landscape is dynamic, and staying ahead will require strategic asset management. Companies must not only address the challenges of today, but also anticipate and prepare for what's on the horizon. As we wrap up, Steve, I want to emphasize that success in Mexico is not about overcoming obstacles. It's about seizing opportunities. It's about leveraging your assets in a way that aligns with evolving market trends, and positions your business for growth. We see a future where businesses that approach asset management strategically will thrive despite these challenges. And in conclusion, my advice to our listeners is to stay proactive, be vigilant in understanding the regulatory landscape, be adaptable to technological shifts, and consider forming partnerships with local experts who can provide invaluable insights. The road ahead may have its challenges, definitely, but with the right strategies in place, companies can navigate and thrive in this dynamic and promising Mexico market. 

Steve Katz  17:43

All right, well, you've definitely given people a lot to think about. And I think it's good advice. There certainly are challenges ahead but if you're if you're armed with the right partner, and the right knowledge, I think you have a much better chance of succeeding. So, Jan, thanks again. What how would you suggest people reach you if they have follow up questions on this topic?

Jan Rene Aguirre  18:05

Sure, Steve. Thanks once again, for the opportunity to share this information with your audience. It's been my pleasure. And I can be reached by email or phone. My email is JAGU double R E at Hilcoglobal.mx. And my phone is well, it's a Mexican phone is + 52 5 58500 8547.

Steve Katz  18:38

All right, perfect. Jan. Thanks again for joining us. We look forward to part four of our discussion which is coming up soon. And listeners we hope that the Smarter Perspective podcast provided you with at least one key takeaway that you can put to good use in your business or share with a colleague or client to help make them that much more successful moving forward as well. And remember, you can always check out more great podcasts and articles featuring timely insights from Hilco experts like Jan at Hilcoglobal.com forward slash Smarter dash Perspectives. So until next time for Hilco Global I'm Steve Katz.