The Mexican M&A market got off to a mixed start this year on the heels of a record-breaking 2021, according to January data from M&A-focused research firm Transactional Track Record (TTR). Marcela Chacón,TTR research and business analyst, told BNamericas there is reason to be upbeat on 2022. With many external factors in play, it is difficult to make specific predictions on this year’s deal volume, said Chacón.

“What is clear is that there are going to be more deals in 2022 in the transactional market than there were in 2021 and could even reach pre-pandemic levels, ” she said. TTR reported 394 deals – including mergers, acquisitions, asset acquisitions, and private equity and venture capital transactions – for Mexico in 2021 with disclosed deal value amounting to US$19.4bn.

The results mark a strong comeback after the pandemic-hit 2020 with 25% more transactions and 78% higher reported value. TTR recorded 20 operations in January with disclosed deal value amounting to US$447mn, representing a 5% drop in the number of deals from the same month in 2021, but up 137% in terms of value. Chacón said there is optimism in place, not just for Mexico but for much of Latin America.

“Even more so when M&A activity continues to play a fundamental role for companies facing technological disruption and growing pressure from shareholders and investors to create value in their companies.”

In terms of specific industries, Chacón said: “M&A transactions in the technology sector in Mexico will be driven by factors such as well-capitalized companies, operational and commercial synergies, and digital transformation, which will keep playing out into the medium and long term.” This trend was already in play before the pandemic, but deals involving tech and internet assets surged in 2021 on the back of strong cross-sector interest from US firms.

In fact, US-based acquisitions of Mexican companies jumped 88% to 141 last year. Meanwhile, TTR recorded 113 tech sector deals in 2021, up from 63 in 2020 and 65 in 2019, with a 44% annual increase in the number of inbound acquisitions from foreign firms in the sector. It helps, said Chacón, that it is not only tech or internet companies that are having to evolve quickly. “Many firms from traditional sectors of the economy have had to go through digital transformation just to keep their business, ” she said, adding that many look for acquisitions in burgeoning sub-sectors, buying the likes of fintechs and edtech firms.

Companies are making acquisitions in those areas “looking to streamline their processes or even reposition their product or brand and provide new services.” These “will undoubtedly boost the transactional market, ” Chacón added. Venture capital transactions and asset acquisitions will continue to play a key role in driving deals as well. TTR recorded 167 VC transactions in Mexico last year with reported capital raised amounting to US$4.77bn.

These reflect a 61% increase in the number of transactions and a 294% jump in capital raised. In January, TTR reported 11 VC deals totaling US$151mn, reflecting a year-on-year increase of 22% on the transactions side, while capital raised soared 1,046%.

Source: Business News Americas / BN Americas - Chile