HELPING A MAJOR AUTO PARTS WHOLESALER/RETAILER END OPERATIONS IN MEXICO

Sam Suchowiecky, CEO of Hilco Global Mexico, discusses the complexities associated with starting up a large-scale division or branch of a business in Mexico, particularly as an extension of a company based outside that country.

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Steve Katz:                                            Hello again, and welcome to the Hilco Global Smarter Perspective Podcast Series. I'm your host, Steve Katz. Today we're speaking with Sam Suchowiecky, CEO of Hilco Global Mexico, about the complexities associated with starting up a large-scale division or branch of a business in Mexico, particularly as an extension of a company based outside that country. Just as a little quick background, Hilco Mexico has proven expertise and trusted relationships that have made it the preeminent partner for servicing and collecting on accounts receivable, negotiating on clients' behalf with lessors, managing restructures, sourcing new funding for operations, rendering outsourcing for payroll services, negotiating with employee unions, and monetizing inventory and other assets for domestic companies and Mexican subsidiaries alike. With that said, welcome to the podcast Sam.

Sam Suchowiecky:                                       Hi, Steve. Great to be here.

Steve Katz:                                            Well, it's great to have you on. Listen, there are so many complexities associated with starting up a large-scale division or a branch of a business in Mexico, particularly as an extension of a company that's based outside of that country. So can you share to start us off your perspective on some of the things that companies and their people that are involved in those kinds of efforts should be most focused on as they look to enter the market?

Sam Suchowiecky:                                       Sure. Well, there's obvious differences. Of course, there's what you could say are cultural or other types of barriers like the language, but I think most companies will get a handle on that relatively quickly. We have a completely different legal system of course. In particular with respect to companies coming into the market, it usually takes them a while to understand how to navigate the business world in Mexico, and also understand how and who to approach to get their deals done, to really operate as close to what they would do in their own jurisdiction.

Steve Katz:                                            Yeah, it seems like it's a nuanced market for sure, and having someone to really help you navigate that I think would be an advantage. Now, I've had the pleasure of hearing you speak in the past so I know that there is another factor, one that's often less of a focus and in some cases overlooked altogether by companies as they orchestrate their entry into the country. That's an exit strategy, a plan for what happens if and when a company determines that it's no longer in its best interest to maintain a physical presence in that country. Can you share your thoughts on that with the audience on why so few companies actually approach that long-range thinking in a practical manner, and then why it's so important to do so?

Sam Suchowiecky:                                       Of course. When you enter into a market, many times you're not thinking of the exit strategy. You're thinking of how to enter the market effectively. I think what we've seen over the years is that there's many times difficulties in exiting a market because by the time you're reaching that moment, of course you've built up some assets that can take different forms, real estate, inventory, intellectual property, et cetera. You have obligations.
                                                       You have employee obligations, possibly union obligations, and other type of obligations that will make it hard to make and to execute a quick transition. Many times our clients come to us at that juncture with the desire of having clarity on an exit, and the different obligations that they have simply do not allow them to have that clarity. What we do as part of our business is help in giving clarity in terms of how to execute an exit, how to maximize the value of the assets, how to wind up employee relationships, human relationships, et cetera.

Steve Katz:                                            Sam, I'm wondering, is there an optimal time for a company to bring you in? How early in the process is either too early or how late is too late? I'm guessing that to achieve the optimal outcome, there's a prime window, and so when should companies look to bring a partner like Hilco in?

Sam Suchowiecky:                                       Steve, I think that's a very good question, and definitely the answer is the earlier the better. I would say that in our experience, we add a lot more value if we're brought on even before the final decision is made. I think what we've seen in the past is at times we're brought in after significant decisions have been made, that will either lead a company to spend more money than they have to, or simply gets a less optimal result on the monetization of their assets. And certainly the good planning and understanding the needs of the client effectively we can guide them and be a lot more effective in maximizing the value of their assets and also avoiding a lot of perhaps unnecessary expenses that pile up as you try and exit a jurisdiction.

Steve Katz:                                            Makes sense to me. [inaudible] Mexico have worked with many companies, assisting them not only in some of that upfront planning that you talked about, but also even more specifically in developing or updating detailed plans as an exit becomes an imminent reality, and in executing the various components of those efforts for clients. So what I'm wondering, I'm sure there are many, but I'm wondering if there's one client engagement specifically that you could top-line for the audience today that really illustrates the complexities of an effort like that and the role that you and your team can play for a company as part of that process.

Sam Suchowiecky:                                       Sure Steve. I think one case that comes to mind is a recent client. The client was one of the largest auto parts wholesaler or retailer in the world. Basically, I think that is a good example of a company that had a successful business. They were rearranging the way they looked at their business in Mexico in particular, and decided that they could handle it from the U.S. directly mostly, and therefore they had created a number of retail outlets, wholesale facilities. They had over 300 employees, and literally thousands and thousands of SKUs of inventory that they had to dispose off in a short period of time. One of the challenges of that transaction is that because of the size of the company they had a commitment to do this by a certain date, and as they approached that date there were a lot of loose ends that they couldn't really handle on their own.
                                                       We helped them first to understand all of those loose ends, and secondly, to get a solution for each one of them. So in a case where perhaps in another jurisdiction Hilco Global might have worked on the inventory disposition, we were actually helping them in substantial logistics maneuvers, providing external security to their facilities, making sure that their inventory was safe both when it was moving around and once it got to a specific destination. We then did a number of auctions of inventory, and helped them to finalize some of the sales of the remaining inventory, and also wind up other types of relationships. Whether they were lease obligations, employee obligations, or other such obligations that essentially enabled them to meet deadline and comply with the original goal that they had in mind in terms of the approach in Mexico.

Steve Katz:                                            And that was a pretty tight timeframe too. What was it, six, eight weeks?

Sam Suchowiecky:                                       That is right. That is right. It was a challenging timeframe for everyone involved. It was successful largely because we were able to work effectively as a team, and I think that's one of the items that sets Hilco Global Mexico apart as well.

Steve Katz:                                            Absolutely. Absolutely. Now, you may have touched on some of this, but what more can you tell us about the sales and marketing efforts specifically that you and the team engaged in, and the expertise that you brought to the table regarding some of those things you talked about, the numerous employee considerations that were involved, fulfillment of tax requirements, and then that overall outcome? What sets Hilco apart from others who be able to provide similar services? Or are there others really in the marketplace who are qualified the way Hilco is to do that?

Sam Suchowiecky:                                       I think in the end the combination of services that we offered the client were unique. And I don't think that there are many other options that offer the comprehensive services we were able to provide. In the end of course, one of the most important parts was monetization of assets. We were able to do that effectively bringing their well-known brand and marketing expertise along with our marketing and monetization expertise to good conclusion. But there were substantial other matters involved.
                                                       At some point we were talking to them about the possibility of actually liquidating their entities in Mexico, and thinking of some uncomfortable obligations for other advisors to tackle. We were able to do that because we know the jurisdiction, we live and business in that jurisdiction, and can really understand the risks better than others. But that's just one example of the challenges that we faced and that we were able to overcome. I think there were other similar challenges that we tackled along the way as a team as well.

Steve Katz:                                            Yeah. It's a theme that we hear a lot on the podcast too. This sort of combination of really diverse expertise and understanding of a market and then the creativity that's needed to develop the right solution even when sometimes the client might come to you with a preconceived idea of what the ideal solution should be. To be able to step in and say, we know we can achieve more in a tighter timeframe with a better monetization outcome by doing something a little bit different than what you're thinking. And we've been hearing that a lot, so that sounds like what you're saying as well. Yeah?

Sam Suchowiecky:                                       Absolutely, Steve.

Steve Katz:                                            All right. Well, I think you've really illustrated for the listeners today just how much thought and planning that companies do need to put not only into their entry into the Mexican market, but to their potential exit from a market somewhere down the line as well. And of course how important it is to select the right partner to achieve the desired outcome in either case. So listeners, if your business or business in your portfolio is currently looking to enter, exit, transact business, or monetize assets in Mexico, it would certainly be in your and their best interest to reach out to Sam and his team for discussion to gain some perspective.
                                                       As I've heard you say many times, Sam, Hilco Mexico has the know-how and the know-who, meaning the connections and the long-standing partnerships, that are required in the market to deliver a successful outcome for businesses. So with that in mind, Sam's email is sams@hilcoglobal.mx. That's S, as in specialists in serving the Mexico market, A-M-S @hilcoglobal.mx. Sam, it was great having you on the podcast with us today.

Sam Suchowiecky:                                       Thanks a lot, Steve. I really appreciate this opportunity.

Steve Katz:                                            Absolutely, and I know we're going to have you on again soon, so listeners stay tuned for part two, we're going to have a different topic, but it's very specific to Mexico as well and doing business in that market. So we hope that today's Hilco Global 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. Until next time, for Hilco Global, I'm Steve Katz.