Despite investor uncertainty surrounding Nafta renegotiations and upcoming presidential elections in July, Mexico has been building a solid expansion in M&A activity this year, generating 136 operations from January to May, up 23.6% from the same period in 2017.

Despite investor uncertainty surrounding Nafta renegotiations and upcoming presidential elections in July, Mexico has been building a solid expansion in M&A activity this year, generating 136 operations from January to May, up 23.6% from the same period in 2017.

In terms of deal value, 57 of the transactions reported values totaling US$6.5bn, a year­onyear increase of 35.7%.

Activity in May alone, nevertheless, slipped a bit, registering 24 transactions ­ 7.7% fewer than in May 2017, according to M&A research firm Transactional Track Record (TTR). Out of those, 15 had reported deal values amounting to US$1.26bn, an 11.2% y­o­y increase.

"The first months of the year have been rather good [for the Mexican M&A market], considering expectations with the election year, Nafta renegotiation and the effects of Trump's policies on the Mexican economy, " said Pablo Perezalonso, managing partner at Mexican finance and securities law firm Ritch Mueller, in an interview with TTR. 

TTR recognized finance/insurance and real estate as the most active sectors this year for M&A, recording 27 and 23 operations, respectively.
Looking ahead, Perezalonso flagged technology as a likely driver of activity in the financial and insurance sector.

"With the new [fintech law], we think we'll see more investments in technology businesses in this sector," said Perezalonso.

"In the real estate sector, we started to see that certain clients are taking a more conservative position regarding new projects until the elections pass and Nafta negotiations become more defined," he added. "As for the projects that are already in motion, we continue to see great dynamism in the housing sector and on the part of logistics."

Deal dynamics
TTR noted that of the 57 operations reporting deal values in 2018, 45 were small market transactions valued at less than US$100mn, 9 were mid­market (US$100mn­US$500mn) and 3 were large market transactions valued above US$500mn.

So far this year, outbound deals from Mexico have primarily targeted US properties, with 8 operations going there from January to May. There were 5 outbound deals to Argentina in the period, followed by Spain and Brazil, targeted in 4 operations each.

Looking at inbound deals, US firms showed the greatest interest in Mexican properties in the first five months, carrying out 19 operations in Mexico, followed by Spain with 6 deals, and 4 apiece from France and Chile.

Private equity and VC
There have been 11 private equity transactions valued at US$31.3mn in January­May, with TTR noting a downward trend in both the number of transactions and mobilized capital.

In turn, TTR recorded 29 venture capital deals, an increase of 71% y­o­y, with mobilized capital of US$194mn in 14 disclosed transactions, representing a decrease of 35%.

Source: Business News Americas / BN Americas - Chile