América Móvil’s sale of Tracfone Wireless to Verizon for US$6.25bn announced in September skewed tracking data higher for M&A activity in Mexico in an otherwise dry third quarter, as reported by research firm Transactional Track Record (TTR). 

The firm reviewed M&A, private equity, venture capital and asset acquisition activity, and reported 68 transactions with total disclosed deal value amounting to almost US$6.73bn.

This reflects a 7% decline in the number of transactions over 3Q19, when 73 operations took place. But disclosed deal value is nearly 300% higher than the US$2.29bn recorded for the same quarter in 2019.

However, excluding the Tracfone deal, total disclosed deal value is only US$475mn – a 79% year-on-year decline.

“Verizon’s ‘mega-transaction’ was not only one of the most remarkable [deals] this quarter for Mexico, but in the entire region. Beyond this it represents an anomaly to the deal flow that Mexico has seen over the course of 2020,” Marcela Chacón, TTR research and business intelligence analyst for Latin America, told BNamericas. 

Chacón added, “no other transaction in the quarter registered an amount above US$100mn.”

Dealmaking in the internet segment, while less active than in 2019, has maintained some growth this year, with TTR reporting 38 deals from January to September (+6% year-on-year) and 19 transactions in the third quarter alone, suggesting some acceleration. 

TTR reported 36 deals in the financial and insurance sector over the first nine months (+13%), with 16 transactions occurring in Q3. 

Cross-Border activity 

Looking at outbound deals in the first nine months of 2020, Mexican companies mainly targeted the US, with 13 operations, followed by Spain, with nine operations. By amount, Spain stands out with US$1.04bn.

US and Canadian firms have been the most active for inbound transactions, carrying out 51 and 11 operations, respectively.  

TTR also reported foreign acquisitions in Mexico in the technology and internet subsectors are on track to see nearly 20% growth this year, with 31 occurring in the first nine months of 2020. 

Private equity

From January to September, TTR recorded only nine private equity operations with value totaling US$183mn, representing a 30% decrease in the number of equity deals compared to the same period in 2019. Total deal value, however, was 173% higher. 

The private equity market has signaled that it is ready to jump on opportunities expected to emerge in the coming months with likely bankruptcies and declining valuations on overvalued properties.

This scenario, however, has yet to appear in Mexico, though Chacón expects an uptick in Q4.

“There is still no certainty of the activation of the private equity, venture capital and asset acquisitions market due to the highly uncertain environment surrounding the international health crisis,” said Chacón. “It would be natural to see an upward trend in the fourth quarter of the year with operations set to close by year-end, not only in Mexico but also internationally.” 

Venture capital and asset acquisitions

Mexico saw 72 VC deals amounting to US$541mn from January to September, representing 16% more operations than in the same nine months of 2019, but a 35% decline in total deal value. 

In the asset acquisitions segment, there have been 42 operations, worth nearly US$1.03bn. This represents a 29% decrease in the number of operations, and a 62% drop in capital.

Source: Business News Americas / BN Americas - Chile