Tech and internet have been dominating dealmaking in Mexico this year with venture capital operations coming to the forefront, especially those backed by US investors. 

There was a 75% year-on-year increase in transactions with US companies acquiring Mexican firms in January-November, with foreign acquisitions in the tech and internet sectors expanding 51% in the same comparison, according to research firm Transactional Track Record (TTR).

In addition, investments through foreign private equity and venture capital firms and funds in Mexican companies jumped by 67% y-o-y, said TTR.

Looking to 2022, “The M&A market in the region will continue to consolidate in the medium and long term, despite the marked differences between the countries of the region, and despite the current climate of uncertainty,” said Marcela Chacón, TTR research and business intelligence analyst for Latin America. 

“Foreign investors’ interest in acquiring Mexican companies will continue to trend, and you see proof of this in what’s happening with the venture capital sector, which, as mentioned above, has been very active and is expected to continue with this dynamic in the coming quarters,” Chacón told BNamericas. 

All things tech, she said, have been huge across Latin America this year. And in the case of the Mexican market, it looks to hold a firm grip on investor appetite as the predominant sector “in the short and medium term, since there are several drivers that have been key to the growth of this sector in Mexico.”

One of these drivers, said Chacón, is a consequence of the pandemic that has created the need for companies to accelerate the digital transformation of their businesses, a process that is drawing strong foreign investor interest.

The second, Chacón said, is “the global trend of convergence between industries that has been stimulated by technological disruptions, especially in sectors like finance, health, among others.”

“The possible vectors for consolidation of the technology sector will continue to be linked to these [areas of heavy disruption],” she added, with high activity expected in the financial and insurance sector, specifically in the fintech sector, and in continued cross-border transactions from the US targeting Mexican assets.

IT’S BEEN A BUSY YEAR

TTR identified 344 transactions in Mexico from January to November – including mergers, acquisitions, venture capital, private equity and asset acquisition, with total disclosed deal value of US$16.9bn. 

As such, the number of transactions were up 26% compared to the same period of last year, and disclosed deal value jumped 59%.

Of the total, 146 were venture capital deals, up 58% y-o-y. Meanwhile, total reported deal value of Mexican VC transactions surged to US$4.27bn, an annual increase of 297%.

Dealmaking in November alone was somewhat cooler compared to the rest of the year, TTR reported.

Mexico saw 22 transactions last month with combined disclosed deal value of US$287mn, down from 23 transactions valued at US$1.80bn in November 2020.

PRIVATE EQUITY AND ASSET ACQUISITIONS

TTR recorded 21 PE operations in the first 11 months that amounted to US$825mn. This reflects a 31% increase in the number of transactions in Mexico, but a 22% decrease in terms of deal value. 

In the case of asset acquisitions, there was 46 transactions through November, amounting to US$5.83bn. This represents a decrease of 12% in transaction numbers and a value increase of 200%.

Source: Business News Americas / BN Americas - Chile