Tech boom driving banner year in Mexican M&A

Transactional activity surrounding the tech sector in Mexico has rebounded strongly from the pandemic, with sweeping shifts in daily activity fueling a swath of deals this year, according to research firm Transactional Track Record (TTR), especially in the venture capital arena.

The firm recorded a total of 64 M&A, private equity, venture capital and asset acquisition deals in the tech sector from January to the end of August with reported deal value amounting to US$1.18bn.

This was a 317% leap in the number of transactions and a 60% increase in reported deal value compared with the same period of 2020, and while M&A was largely silenced by COVID-19 last year, the one sector that managed to move forward was with technology and internet companies. 

Marcela Chacón, TTR research and business intelligence analyst for Latin America told BNamericas that the tech drive in M&A is something the firm is seeing replicated in Latin America’s largest economies, identifying two main factors as a cause.

“One is derived from the consequence of the pandemic that has created the need for companies to accelerate the digitization and transformation of their businesses, which has generated attractive investment from foreign companies,” said Chacón.

The second, she said is that the volume of transactions in the sector represents “the convergence of industries being stimulated by the tech disruptions happening globally, especially in finance and health, among others.” 

As such, Chacón said she expects to see consolidation occurring along these vectors of convergence for the medium and long term.

 “There’s no doubt that this trend is going to keep growing, with digital transformation advancing as new habits form faster and faster,” said Chacón, adding, “this will be a massive market opportunity that will improve service and create value in a variety of economic sectors." 

Source: TTR

Deal activity in the technology sector surged in the second quarter, fed partly by deals held up in the pipeline during the pandemic, as well as by bargain-hunters looking to pick up or back targets in need of support after last year’s crisis.

But big deals keep coming, the latest coming last week, a US$57mn venture capital injection in the Series B financing round for Mexican fintech Flink, a hybrid platform that provides both digital banking and investment services, straddling the line between neobanks like Nubank and a digital brokerage house.

Venture capital has been the primary vertical for activity in 2021, accounting for 49 of the 64 transactions in the sector this year, as well as reported deal values amounting to US$1.15bn, or nearly 98% of all disclosed deal value in the sector for the period.

This is a 53% jump in the number of VC deals compared with the first eight months of 2020, as well as 339% surge in the capital mobilized through the transactions. 

And the trend looks to continue, with backers like Tiger Global, Tencent, Ribbit Capital, Accel and Softbank looking to get in on the ground floor with the region’s next big unicorn in a torrent of capital investments this year across the region.