Mexico's M&A downturn deepens

M&A transactions in Mexico declined by over 25.6% from January to July in terms of deal value with the amount coming in at US$7.95bn, according to the latest data from Transactional Track Record (TTR). 

Similarly, the number of transactions, 167, amounts to a drop of nearly 23.7% over the same period, according to TTR. 

Aside from Argentina, Mexico saw the largest decline among Latin America’s major economies, effectively pulling down regional M&A figures. 

Over the past four years, the overall value of M&A deals in Mexico fell by nearly half to US$13.9bn in 2018.  

Reluctance among US acquirers

There were 30 acquisitions of Mexican companies that originated from the US in January-July, putting 2019 on track for a full-year drop of 16.7% compared to 2018, according to TTR.

Unlike Brazil and other South American markets that tend to rely on domestic deals to drive M&A activity, Mexico relies heavily on inbound investment from the US. 

In terms of inbound M&A deals across leading business sectors tracked by TTR, 22 originated from the US, while 28 originated from other foreign countries.

 

Private equity

Private equity investment also dried up in January-July, with the value of disclosed transactions plummeting 96% year-on-year to US$67mn. Over this period, only eight private equity deals have been completed. 

The drop comes in light of slowing transaction activity in 2018, following in the wake of record levels of private equity activity in 2017.  

Partly offsetting the private equity decline was increased appetite among venture capital firms. 

Venture capital

Mexico saw venture capital deal value rise to US$450mn, up 31% from January-July in 2018.

The number of VC transactions inched down 8.9%, according to TTR.

Tech shines bright 

Amid the general gloom among investors regarding Mexico, the country's technology sectors remain a distinct bright spot. 

In the first seven months, venture capitalists carried out 22 deals in the internet sector, and another 15 in the technology sector, representing year-on-year increases of 29% and 67%, respectively. 

Venture capital also accounted for the overwhelming share of the total M&A, private equity and venture capital deals in tech, which numbered 28 in the internet sector and 25 in the technology sector.  

In July, there were 17 acquisitions that originated abroad in Mexico across M&A, private equity, venture capital and asset acquisition, according to TTR. The estimated value of these deals was US$2.72bn.

The month of July saw three deals in the technology and internet sectors. There were also four deals in the sports and leisure sectors, and the same number in the distribution and retail sectors.