An analysis of mergers and acquisitions in Mexico: 1985-1996

The recent devaluation of the Mexican peso and the resulting “Mexican syndrome” has opened up a world of opportunities for foreign investors. Mexico with all of its economic problems is still seen by many investors as a sound economy with the necessary ingredients to stage a strong comeback. Economic crises often lead to an escalation of corporate restructuring such as mergers, acquisitions and joint-ventures, both, domestic as well as cross-border. This paper examines the M&A trends in Mexico over the period 1985-1996.

The results indicate that cross-border M&A deals have increased during the nineties, with Europe being a major participant since 1995. As far as the industrial sectors are concerned, the study shows that very few M&A deals have been completed in the construction, transportation, and petroleum industries. The managers of multinational firms should take note of this and public administrators should attempt to attract foreign capital towards these sectors. A sound distribution infrastructure is very essential in order to attract much needed foreign capital to the country.

The study also finds that relatively few cross-border M&As have been completed with state-owned enterprises. With the aggressive reforms of the Zedillo government and the privatization of the transportation, electricity, and petroleum sectors, there is bound to be an increase in competition and opportunities for investments in these sectors.

Finally, managers of multinational corporations who are targeting Mexico, should be fully aware of the differences in culture and ownership status of target firms. This study shows that a large number of the deals have been done with privately-owned firms, and would therefore need good negotiation skills.