Mexican M&A activity slipped in the first two months of the year with prospects for a rebound dimming amid the deepening global economic impacts from coronavirus compounded by the oil price showdown between Russia and Saudi Arabia.

According to research firm Transactional Track Record (TTR), Mexico saw 42 transactions in January and February – covering M&A, private equity, venture capital and asset acquisition deals, including 19 transactions with reported deal value amounting to US$1.06bn.

The figures represent a 17.7% drop in the number of deals from the same period in 2019 and a 65.7% decline in reported value.

“The volatility that has occurred in the first two months of the year, stemming from the high degree of uncertainty, is making it hard to close some of the deals that were expected at the start of 2020,” Marcela Chacón, TTR research and business intelligence analyst for Latin America, told BNamericas. 

“Sellers’ expectations of purchase offers from possible investors in the last weeks have restrained their ability to effectively value certain assets. Therefore, the dynamism that Mexico had in the M&A market is likely to be delayed for a while,” she added.

"If the current environment continues, created by the constant devaluation [sic] of the Mexican peso, the sudden shocks in oil prices, as well as the uncertainty generated by coronavirus, this could represent another challenge for 2020 in the Mexican M&A market.” 

However, "once this volatile market environment settles down, potential buyers could take advantage of these low valuations for M&A targets to close deals in key, sensitive sectors in such a scenario, such as those in technology and internet, which is one of the most dynamic sectors in the Mexican transactional market,” according to Chacón. 

“Other actors that will benefit will be the main private equity firms, which have accumulated debt funds in recent periods and could recover assets at a lower price.” 

So far in 2020, the strongest M&A activity has been in the financial and insurance industry, followed by the internet sector, generating nine and five deals, respectively.

TTR's "deal of the month" for February was Carso Energy’s US$153mn acquisition of Ideal Panama. The firm said Santander Corporate Investment Banking in Mexico handled due diligence for the deal.

Cross-border M&As

Looking at outbound deals in the first two months, Mexican companies have mainly opted to target investments in Spain, Argentina and the US, with three operations in each country. 

US and Spanish firms have been the most active in targeting Mexican companies, carrying out eight and three acquisitions, respectively. US inbound transactions fetched the highest reported value at US$155mn.

Private equity, venture capital and asset acquisitions

TTR reported only two private equity operations in Mexico in the period, totaling US$66mn and one more than a year earlier, while the value was up 94.7%.

There were 13 VC deals amounting to US$170mn in January and February, a similar number to last year but up 75% in value.

In the asset acquisition segment, there were nine operations worth US$385mn, down 31% and up 257%, respectively.

Source: Business News Americas / BN Americas - Chile