The year 2019 was not characterized by important transactions of Functions and Acquisitions (M&A). This was influenced by the uncertainty within the country and beyond our borders. However, the value of transactions increased 40% to US$15,386 million, compared to 2018, a year that had a relevant drop due to the change of government. This sober recovery is still far from the results of 2015, when the total value of transactions reached $25,252 million, according to Bloomberg data.
One of the key factors affecting the state of investors is undoubtedly the U.S.-Canada trade agreement (T.MEC). Although the amending protocol was signed last December, it has yet to be approved by the Canadian Senate. There are up to 25 billion dollars waiting at the border for this ratification.
Another important aspect is the economic slowdown expected in the United States this year or in 2021. Its macroeconomic data looks good, but the market perception is that it could cool down. Now, what happens in political matters, specifically in the presidential elections, will keep the markets on edge, as well as the trade war with China. We should not underestimate the importance of what is happening in the rest of the region: Chile, one of the countries that seemed to be more stable, is now a question mark.
As for Mexico, sectors such as energy, which in 2019 had 26 transactions with a value of 4,871 million dollars, have seen investments slow down, especially in renewable energies, after regulatory changes. In others, such as pharmaceuticals, suppliers have suffered convulsive initial bidding processes. There is also a latent fear of the opening of this industry to the Chinese and Indian markets, which could have repercussions in terms of quality.
It is a fact that the Mexican and Brazilian markets are very attractive to domestic and foreign players, and it is clear that investors are looking to consolidate their participation with smaller companies or by acquiring brands from foreign players. Another aspect that plays in favor of the domestic market is the demographic base that we have very clear from now until the year 2050. In this context, the retail and consumer industry had 17 transactions with a value of US$672 million.
The financial sector is another that continues to seek profitability and will continue to focus on its core business. This industry registered 19 transactions with a value of US$3.68 billion.
Traditionally, the United States has played a predominant role in M&A transactions due to its maturity as an investor. But there are also some European countries, such as Germany, Spain and France, which are gaining some relevance. For larger Mexican investors, the U.S. market is always attractive, as are Asian markets. On the other hand, smaller companies tend to see growth opportunities in Latin American countries.
Because of Mexico’s exposure to external factors, coupled with a domestic economy that we do not yet know how it will develop. However, the foundations must be laid to continue to grow and generate investment opportunities. A much more open competition market must be created, with clear rules, in order to be more transparent and reduce corruption levels. But, above all, education levels must be increased. If this transformation is achieved, the key to success will have been found.
Génesis Moyeda Salazar.
Gloria Ponce de León & Hernández