M&A activity in Mexico was minimal in October with research firm Transactional Track Record (TTR) reporting deal values totaling just US$216mn.

The 26 M&A, private equity, venture capital and asset acquisition operations last month were two fewer than in October 2019, though reported deal value was 94% lower than the US$3.51bn in the same month a year before. 

Marcela Chacón, TTR research and business intelligence analyst for Latin America, said the downbeat activity was a reflection of the “larger environment of global uncertainty” with the pandemic, as well as “confusing signals that the Mexican government has given in recent months” to investors.

Nevertheless, “the sector is optimistic about the remainder of 2020 and part of 2021, not only in that country but in other strategic areas of the region,” she told BNamericas.

TTR said in the third quarter there were 68 M&A, private equity, venture capital and asset acquisition deals in Mexico with total disclosed deal value amounting to US$6.73bn.
The number of deals fell from 73 in 3Q19, while disclosed deal value in 3Q20 was up nearly 300% from US$2.29bn in the same quarter 2019.

With the private sector now working to absorb the impact from the pandemic, “TTR has seen an interesting flow of operations emerging in Mexico that is the result of selling off non-strategic assets with the aim of providing companies stability in their capital structure,” said Chacón 
“Part of this flow makes up some of the 10.8% growth in venture capital transactions [we’ve seen], especially in the internet sector, as well as finance and insurance.” 

New growth areas, she said, are indicative of how the health emergency is becoming “a big, unique opportunity to boost investment,” one that governments like Mexico’s “must take advantage of and optimize its strategies to attract investment,” particularly with respect to re-accommodating operations and financial structuring, “which will be keys in the short and medium term.” 

Foreign acquisitions in the technology and internet sub-sector have risen nearly 18% this year through October to 40 despite a 50% drop in foreign private equity and venture capital funds investing in Mexican companies and a 3.4% drop in US-based acquirers of Mexican firms. 

The largest transaction in Mexico in October was convenience store group FEMSA Comercio’s purchase of Chile’s OK Market for US$54.5mn.

Cross-Border activity

Looking at outbound deals in the first 10 months of 2020, Mexican companies mainly targeted investments in the US, with 14 operations, followed by Spain with 10. By amount, Spain stands out with US$1.04bn in outbound transactions. 

With respect to inbound transactions, US and Canadian firms have been the most active in targeting Mexican properties, carrying out 57 and 11 operations, respectively, from January to October.  

Private equity 

TTR recorded 10 private equity operations in Mexico in the 10 months with value totaling US$183mn, down 37.5% but up 173%, respectively, year-on-year. 

Venture capital and asset acquisitions 

Mexico saw 82 VC deals amounting to US$1.03bn in reported deal value from January to October, up 11% but down 42%, respectively.

In the asset acquisitions segment, there were 47 operations worth US$1.06bn, 28% and down 66%, respectively.

Source: Business News Americas / BN Americas - Chile