Mexico City — The number and value of mergers and acquisitions grew in Mexico in 2021 in comparison with the previous year, when companies had put deals on hold amid the uncertainty generated by the pandemic.
Year-to-November 30, Mexico recorded 344 M&A deals, totaling $16.92 billion, up from the 252 for the same period of 2020, with a total volume of $13.01 billion, according to Transactional Track Record (TTR).
That was a year-on-year increase of 36% in transactions, and a 30% increase in value.
“2021 and 2020 were like night and day, with much better M&A results this year”Sergio García del Bosque, managing director at Seale & Associates, a boutique investment firm.
In all of 2019, before the pandemic struck, 312 M&A transaction were carried out, valued at $18.92 billion, according to TTR.
The growth in transactions, in line with the global trend, was clear by the end of third quarter, when the number of deals exceeded that of 2020, an increase partly driven by deals financed with venture capital.
“We attribute it [the increase] to the fact that the large majority of transactions are in growth sectors, technology, startups, and are the result of market concentration, in sectors where there is not traditionally a major player,” Daniel Guaida Azar, a partner at Mexican law firm González Calvillo and an M&A specialist, said in an interview.
Experts pointed to the rise in the number of transactions, more than the increase in value.
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Greater availability of funds due to government stimulus programs, interest rate levels, together with the reactivation of deals following the pause of last year were the main drivers of deal growth, according to Sergio García del Bosque, managing director at Seale & Associates, a boutique investment firm.
He agreed that startup capital contributed to increasing the number of deals.
In 2022, experts believe that M&A growth will continue, but rising inflation, an expected increase in interest rates and the continuing uncertainty surrounding Covid-19 could put a damper on growth in the number and volume of deals.
And there are other headwinds, such as uncertainty regarding legislative changes, and delays caused by government bureaucracy.
“The public administration has lost a lot of talent, and that slows down the permitting process,” González Calvillo’s Guaida said.
Following are a selection of the most significant deals of 2021:
Televisa, Univision Merger Catches AMLO’s Eye
In April, Grupo Televisa announced it would merge its TV content business with Univision Communications, one of the largest Spanish-speaking TV channels in the U.S.
Televisa will receive $3 billion in cash, $1.5 billion in Univision capital and $300 million from other commercial ventures, making it one of the year’s biggest deals in terms of value.
The operation has been approved by Mexico’s regulators and is pending approval in the U.S. When the deal was announced in April it was planned to close this year, but Univision said in November that its closure would be postponed to early 2022.
A Spanish-language streaming platform with a global reach will be the first product of the merger.
The deal is part of a restructuring of Televisa’s business, and was significant enough to become a theme in the morning press conferences of Mexico’s President Andrés Manuel López Obrador.
The Mexican government expects to receive 15 billion pesos ($733 million) from the transaction.
“They didn’t manage to pay us this year, but there is a commitment to pay us at the start of next year,” AMLO, as Mexico’s president is known, said in a press conference on December 20.
Televisa this year sold its 40% stake in live events company OCESA to Live Nation, for which it pocketed 5.20 billion pesos ($254.2 million).
Femsa Eyes U.S., Brazil
Fomento Económico Mexicano (Femsa), a Mexican retail, logistics and bottling conglomerate, carried out several transactions this year that were relatively small in size amid the expansion of its business in the U.S. and Brazil, the two largest markets in the Americas.
In recent months it has announced at least five small acquisitions to increase the presence in the U.S. of its subsidiary Envoy Solutions, which specializes in the distribution of cleaning products, packaging solutions and supplies to schools, restaurants and offices.
The most recent operations as part of this strategy were carried out in November with the purchase of Johnston Paper and Next-Gen, allowing it to grow the subsidiary on the U.S. east coast.
In addition, in the last six months Femsa’s bottling subsidiary, Coca-Cola Femsa, announced three deals as part of its strategy to increase its distribution capacity and portfolio.
The most recent deal was announced on December 17, the acquisition of Brazilian bottler CVI Refrigerantes, which will allow Femsa to control 52% of the total volume of Coca-Cola distribution in Brazil.
The deal, valued at 632.5 million reais ($111 million) comprises bottling and distribution operations in Rio Grande do Sul with an annual capacity of 30.9 million crates, excluding beer.
Coca-Cola Femsa also recently acquired the Therezópolis beer brand from Greenday Natural Products to incorporate the brand into its Brazilian portfolio, and also struck up an agreement with the Estrella Galicia brewery to distribute its beer in Brazil.
First Fusion of Real Estate Investment Funds in Mexico
This year saw the first merger between two REITs in Mexico, involving Fibra Plus and Fibra HD, the first deal of its kind in the country, but in a deal which suffered ups and downs that put the merger at risk due to the discrepancies in the exchange factor that Fibra Plus proposed for the merger. The deal finally closed in March.
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The conflict put the deal in jeopardy for more than a month amid allegations of attempts to block the merger and conflicts of interest. But both sides gave in and agreed on a new deal, with the merger taking place in October, creating the seventh REIT in Mexico.