Mexico sees slow start to M&A activity

M&A deals have kicked off 2021 with a thud in Mexico with 19 transactions in January, compared to 32 a year earlier and 36 in December, according to research firm Transactional Track Record (TTR).

Aggregate reported deal value on mergers, acquisitions, venture capital and asset acquisition transactions reached US$102mn, an 85% decline from disclosed deal value in January 2020.

“While the COVID-19 pandemic has affected activity in mergers and acquisitions in recent months, the low dynamism of January is a natural behavior that is generated in the market, [a trend also common] in months like February and March,” TTR research and business intelligence analyst for Latin America, Marcela Chacón, told BNamericas.

“It is expected that after the first quarter there will be upward activity, and the M&A processes that were left on standby in the previous quarters are expected to resume in these periods,” added Chacón.  

Fund managers are optimistic about an M&A rebound this year, assuming economic reactivation from COVID-19 lockdowns and a strong vaccine rollout, as investors look for assets that need capital injections or seek companies like fintechs that are seeing high valuations cool to attractive levels during the pandemic. 

“Mexico – along with other strong countries in the region such as Brazil or Chile – which obtained a considerable volume of transactions last year, may be the countries with the greatest strength in terms of consolidation of the region in the short term,” said Chacón.

She added these are also the countries that are leading COVID-19 immunization efforts.

“This undoubtedly becomes a new factor that intervenes on the investor radar, and that can affect market behavior to some extent,” she said.

Technology was the most active sector in January, generating eight operations, followed by finance and insurance with five transactions, TTR said. 

Cross-border activity 

Mexican companies targeted mainly Spain for outbound deals with two transactions reaching US$4.9mn, while US firms led inbound transactions, with five deals for US$92.4mn.

Venture capital and asset acquisitions

Only seven VC deals were closed in January – a 46% year-on-year drop, while only four asset acquisitions represented a drop of 33%.