Tech, finance, internet deals to bolster shaky 2021 in Mexican M&A – Transactional Track Record
While the reduced M&A activity seen in the first quarter is likely to continue through 2021, deal flow will vary strongly by sector, with certain areas like technology and finance likely to see more deals in the coming months, according to Marcela Chacón, Transactional Track Record (TTR) research and business intelligence analyst for Latin America. 

Mexico recorded 63 combined M&A, private equity, venture capital and asset acquisition transactions in 1Q21, either closing or announced, for a total reported deal value of US$993mn in the period, TTR stated in a report.

The activity marks a 23% year-on-year drop in the number of transactions and a 58% decline in reported deal value, according to TTR. 

“[Recent deal] evolution suggests 2021 will continue to be a year deeply marked by the pandemic,” Chacón told BNamericas. “Therefore, we don’t expect 2021 to have major differences from recent months in terms of transaction volume [i.e., quantity of transactions].”

“It is worth clarifying, however, that in any case, the dynamics of the M&A market is still active in different sectors,” she added. 

Even with deal flow still weak in pandemic-stricken sectors, such as tourism and the transport, aviation and logistics sectors, Chacón said, the financial/insurance, technology and internet sectors saw transaction volume increase at levels well into double digits, as shown below.

TTR recorded 20 transactions tied to the financial and insurance industries in Mexico during Q1, for example, a 33% increase in number over the same period of 2020, while internet-related deals jumped 38% year-on-year to 11.

CROSS-BORDER ACTIVITY

Looking at outbound deals in the first quarter of 2021, Mexican companies strongly targeted Chile, recording five transactions, followed by Spain and the US with three transactions each. By amount, Spain stands out, with US$10.9mn in outbound Q1 deals.

With respect to inbound transactions, US firms were the most active in targeting Mexican assets, carrying out 21 deals in the quarter, with those sourced from the US valued at US$658mn.  

Technology and internet, Chacón said, “have been the most attractive sectors in cross-border transactions.”

“This trend may prevail in Mexico, not only in 2021 but in the long term,” she added. 

PE, VC and asset acquisitions

Mexico recorded only three private equity transactions in the first quarter of 2021, down from four deals in 1Q20, with a combined value of US$66mn (-48% year-on-year). 

Mexico saw 31 venture capital transactions from January to March for an aggregate value of US$217mn. This represented a 15% year-on-year jump in number, though the total capital was almost 30% lower than that seen in VC deals in the same period a year before. 

In the asset acquisition market, 10 transactions with values amounting to US$26mn were closed in the first quarter, which implies a decrease of 44% in the number of transactions and a decrease of 95% in the amount compared with the same period of 2020.

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Source: Business News Americas / BN Americas - Chile