M&A activity in Mexico is beginning to feel the benefits of economic rebounds in the US and Europe, with research firm Transactional Track Record (TTR) reporting 23 transactions last month – including three worth more than US$500mn – for a combined disclosed deal value of US$2.37bn.

The figures represent a 35% increase in the number of M&A, asset acquisition, private equity and venture capital transactions with a nearly 16,000% surge in reported deal value compared to May 2020 – respectable numbers even if last May makes a poor comparison base amid lockdowns. 

“Mergers and acquisitions data coming in [this year] through May have been quite decent so far,” TTR research and business intelligence analyst for Latin America Marcela Chacón told BNamericas. 

“And some of the buoyancy and economic renewal being seen in key areas like North America and Europe … is greatly contributing to the growth of transactions locally,” said Chacón. 

The month adds to a strengthening trend in M&A in Mexico, with 132 transactions since the start of the year, 64 of which reported deal value amounting to US$9.25bn. 

This amounts to an 18% jump in the number of transactions and a 221% increase in the disclosed deal value compared to January-May 2020.  

Technology has been the most active sector this year, according to TTR, with 39 transactions in the first five months, up 86%. 

Deals in the financial and insurance sectors came second, with TTR reporting 34 in the period, up 79%. The number of deals in the internet sector reached 18, double the figure of a year earlier. 

Chacón told BNamericas that the tech and internet sectors have been and look to continue being the strongest draw for investors in 2021. 

“At this time it is natural that some investment funds direct their interest towards more stable and not-as-cyclical economic sectors in their investments in the short term, such as the technology and internet sectors,” she said.  

“However, there’s also been considerable growth in the financial sector, a sign of just how strong activity has been with the fintech sector, especially in private equity and venture capital operations,” said Chacón. 

“All of these transactions entail restructuring, strategic alliances, market expansion, divestments of strategic assets, as well as injection of liquidity in these two sectors, [and are] helping to rescue the country from short-term 'stagnation' in the transactional market,” she added.

Cross-border dynamics 

Looking at outbound deals this year, Mexican firms have been most active in targeting US, Chilean and Spanish assets, carrying out 11, nine and seven operations, respectively, in the first five months. 

By deal amount, the largest territory for outbound transactions has been the US with US$1.32bn, helped significantly by state-owned oil giant Pemex’s US$596mn acquisition of the other 50% of the Deer Park refinery in Texas from Shell, announced in May.

With respect to inbound transactions, the US has been betting most on Mexican assets, carrying out 43 operations, followed by Spain with seven transactions. US inbound deals this year amounted to US$1.32bn through May. 

Private equity, venture capital and asset acquisitions 

As for foreign private equity and venture capital funds investing in Mexican companies, injections have seen a 200% increase year-on-year. 

TTR recorded seven private equity deals with capital raised amounting to US$76mn, an increase of 16.7% in the number of operations and a drop of 39.9% in capital. 

In the VC segment, TTR reported a total of 64 operations through May for US$1.43bn, an 88% rise in the number of operations and a 340% increase in the capital raised.

On asset acquisitions, 19 operations were registered worth US$4.9bn, a 32% decrease in the number of operations but a 469% increase in the amount.

Source: Business News Americas / BN Americas - Chile