Mexico’s M&A deal flow dipped again in August after a modest rebound following the April lockdown, as players allow valuations to drop before snatching up opportunities later this year or next, according to research firm Transactional Track Record (TTR).

TTR reported 22 transactions – including M&A, private equity, venture capital and asset acquisitions – in August, down from 33 in the same month of 2019, with total reported deal value falling 66% to US$265mn.  

Looking at cumulative activity in the first eight months of the year, TTR recorded 185 transactions, of which 90 had reported deal value amounting to just under US$5bn, reflecting an 11% decrease in the number of operations and a 42% drop in reported deal value, with respect to the same period of 2019.

“Although there continues to be great interest in the transactional market in Mexico, especially in restructuring segments, in recent months various companies are adapting to the volatile market environment,” Marcela Chacón, TTR research and business intelligence analyst for Latin America, told BNamericas. 

The dip in August comes despite equity fund and venture capital specialists in recent weeks signaling a buildup in deal energy. Investors would be looking for solid businesses that need capital to endure the pandemic-related economic crisis, waiting to see overvalued properties (particularly in the fintech sector) to attain more realistic valuations, or holding out to pick up assets from the series of bankruptcies already underway. 

“This optimistic trend,” said Chacón, “may not be seen until the fourth quarter of 2020 or early 2021.” 

In the meantime, investors “are even doing an exhaustive analysis to identify opportunities, to take advantage of strategic alliances in future operations, to consolidate their markets in some sectors, and even to expand business areas in terms of sectors and strategic geographies,“ Chacón said.

Cross-border activity

Regarding outbound deals from January-August, Mexican companies mainly targeted investments to the US, with 13 operations, followed by Spain, with nine operations. By amount, Spain stands out with US$1.04bn.

US firms were most active in inbound transactions, targeting 44 Mexican properties. This marked a 10% increase of US-sourced inbound deals. US inbound transactions fetched the highest level of capital of any source country with a cumulative total of US$1.11bn.

Canada and Chile were the next most active with inbound deals, carrying out 10 and 7 transactions in the period, respectively.  

Private equity, venture capital and asset acquisitions

TTR recorded eight private equity operations in Mexico by August, with value totaling US$183mn, representing a 27% decrease in the number of equity deals compared to the same period in 2019. Total deal value, however, was 173% higher.

Mexico saw 65 VC deals amounting to US$460mn, representing 23% more operations, but a 9.4% decline in total deal value. 

According to TTR, all five VC operations in August were tech-related, led by US$15mn in Series B funding to conversational commerce startup Yalo from Sierra Ventures and B Capital Group. 

In the asset acquisitions segment, there have been 40 operations during the first eight months, worth US$1.67mn. This represents a 29% decrease in the number of operations, and a 40% drop in capital.

 

Source: Business News Americas / BN Americas - Chile