Technology and internet-driven venture capital deals continue to bolster Mexican M&A activity, yet renewable assets could become more attractive. Research firm Transactional Track Record (TTR) reported VC deals made up 26 of the 52 operations it recorded in January and February. Fuel price rises as result of the Russia-Ukraine war could bolster energy deals, however, especially in the renewables segment, according to TTR analyst Marcela Chacón.

“These events have had a direct effect on the energy sector, ” Chacón told BNamericas, “And even though Mexico’s dependence [on Russian oil and gas] is much less than others’ , energy price increases are the most immediate impact we foresee.

” She added, “it seems very likely that a substantial opportunity will be opening up in the medium term for the renewable energy sector.” Chacón said renewables are seen as an attractive alternative to Russian hydrocarbons, especially in the long-term search for stable energy prices unaffected by politics. Renewable firms “will benefit” in the M&A market with this situation, she said, and “not just in Mexico, but in strategic areas across Latin America.” STRONG START The war began just as Mexico saw rising transactional activity.

TTR recorded 23 operations in February, announced and closed, with disclosed deal value amounting to US$1bn, buoyed by Mexican plastic giant Alpek’s 100% acquisition of PET-maker OCTAL’s operations in Oman, Saudi Arabia and the US for US$620mn. For the year running, TTR recorded 52 operations – including mergers, acquisitions, private equity, venture capital and asset acquisitions – in January and February with 29 transactions disclosing deal values of US$1.55bn.

This represents a 13% increase in number of operations over the same two months of 2021 and a 278% surge in disclosed deal value. Both the internet, software and IT and real estate sectors registered seven transactions in January and February, up from four operations per sector, TTR added. Real estate has dominated the asset acquisition segment, with the sector generating eight AA operations, 11% more than in the year-ago period and a 298% increase in deal value.

VC SHINES

And venture capital operations continue to shine, with 26 operations in the first two months having a combined value of US$537mn, or an 8% increase in the number of deals and 156% jump in value. Private equity, however, has dropped off the radar. “We’re seeing a very upbeat dynamic [in VC], coming on the growth of startups and number of companies at stages that are easier to back than the kinds of projects private equity [goes after] in which a greater risk is assumed, ” Chacón said.

“This trend is expected to continue throughout 2022, ” she added, with the current atmosphere of uncertainty lending itself even further to investors “who can take advantage of the risk to close deals at a lower price tag.” Chacón added that 2021 was a banner year for private equity operations, with investors eager to scoop up deals on troubled assets struggling to survive after the pandemic hit in 2020. She added the market was helped last year by low interest rates and fiscal stimulus in the system, but these supports have since faded.

Source: Business News Americas / BN Americas - Chile