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Mexican dealmaking delivered a solid performance in 2024, and volume held steady in Q1 2025, but uncertainty around its relationship with the US could shake the country’s M&A market
The economic outlook for Latin America’s second-largest economy is precarious. Economic growth in Mexico has slowed over recent years, according to the Economist Intelligence Unit, from 3.2 percent in 2023 to 1.4 percent in 2024, with a recovery not expected until 2029. High inflation, a weak peso and an uncertain investor outlook are weighing down a sluggish economy, with the World Bank recently reducing its 2025 GDP growth forecast by 0.6 points, to 1.5 percent. Looking ahead to 2026, the World Bank predicts a slight boost in Mexico’s economy, projecting GDP of 1.6 percent.
M&A activity by value Q1 2020 – Q1 2025
Target location: Mexico Bidder location: Global Sectors: All Sectors
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Effective July 1, 2023, the underlying Mergermarket data supporting the M&A Explorer was consolidated with Dealogic data to produce an even more complete picture of the M&A marketplace. M&A Explorer commentary published before July 1, 2023 may reference data that does not reflect this consolidation.
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The question of tariffs from the US adds an extra layer of uncertainty to this already unstable outlook. The US administration has imposed a 25 percent tariff on exports that are not compliant with the United States-Mexico-Canada Agreement (USMCA), such as hydrocarbons and petroleum-based products, as well as a 10 percent levy on potash. Despite an exemption on USMCA-compliant products such as textiles and apparel, the situation remains precarious and leaves markets uncertain.
However, a positive indicator for the coming year is the decline in interest rates, with ongoing cuts bringing welcome relief for dealmakers looking to finance deals. Mexico’s Central Bank delivered its sixth straight rate cut in late March, bringing the rate down to 9 percent, its lowest level since September 2022.
Industrials drive dealmaking
The value of M&A deals targeting Mexican assets grew in 2024 despite the economic volatility. A total of US$10.7 billion of deals changed hands last year—an 8 percent uptick compared to 2023. Deal volume, however, decreased from 125 to 99 deals over the same time frame, indicating a preference for larger transactions, very much in line with global trends.
A string of big-ticket purchases within the industrials sector pushed up overall deal value in 2024. This included the largest deal of the year: food and petrochemicals conglomerate Alfa’s spin-off of its entire stake in plastic chemicals manufacturer Alpek. The US$2.7 billion deal marks the final step in the conglomerate’s move to become a food-focused business.
The industrials sector also generated the largest cross-border deal of the year: French construction and manufacturing company Saint-Gobain’s acquisition of construction chemicals business OVNIVER Group. The US$815 million deal aims to strengthen Saint-Gobain’s position in the high-growth Mexican and Central American markets as it expands its global presence in the construction chemicals market.
The top deal from a US acquirer also targeted the industrials sector: mid-market PE firm Mill Point Capital’s carve-out of Femsa’s food service and refrigeration divisions, Imbera and Torrey. The US$452 million divestment is in line with Femsa’s ambition to focus on its core retail and beverage operations. However, overall US dealmaking in Mexico has been on a downward trajectory since 2021, with 18 deals valued at just US$0.2 billion announced in 2024—the lowest recorded deal value since 2018.
Having attracted some of the largest deals of the year, the industrials sector recorded its second-highest annual value on record in 2024. A total of US$3.2 billion was spent across 14 deals over the course of the year.
The first quarter of 2025 in Mexico witnessed a dip in deal value and volume, in line with the majority of global markets. The total fell by 76 percent year on year, to US$820 million, while transaction volume dropped by 5 percent year on year, to 19 deals.
The largest deal of the year so far saw US credit reporting agency TransUnion acquire a majority stake in its Mexican arm, TransUnion de Mexico, for US$560 million.
Drivers and opportunities
The “nearshoring effect” will continue to be a significant driver of inbound M&A into Mexico. Interest in the automotive sector, manufacturing, chemicals and packaging are all providing a draw for overseas investors looking to localize supply chains and bring down costs, generating M&A and financing opportunities.
The US’s souring relationship with China has arguably benefited Mexico in recent years, with many US companies relocating their factories to Mexico—a strategy known as “friendshoring.” Indeed, Mexico is poised to be a key beneficiary from the US’s nearshoring efforts, with its share in US-serving supply chains set to increase to 36 percent over the next few years, according to a recent KPMG survey.
Chinese investors are also increasing their presence in Mexico as a “back door” to the neighboring US. Tariff avoidance is one motivating factor, with the US administration’s imposition of a 145 percent levy on certain Chinese imports set to drive this trend forward. This could give rise to a greater level of inbound dealmaking into Mexico, as Chinese firms look for a foothold in the wider US market.
Challenges on the horizon
Perhaps the most urgent challenge facing Mexican dealmaking is the US administration’s position on tariffs. Despite a reprieve on USMCA-compliant products, businesses now realize that the imposition of tax on other imports was more than a negotiation tactic and that the president intends to continue with the policy. This could be a blow to Mexican businesses, making an escalating trade war a real possibility. These tensions could damage share prices and dampen investor appetite, holding long-term ramifications for the Mexican M&A market.
Another move that could dampen M&A activity is the abolition of competition watchdog COFECE, along with other regulatory authorities such as telecommunications regulator IFT. A bill to create a new Mexican competition law, watchdog and set of legal parameters could be approved by the country’s Congress by the end of April. According to the bill, the new competition agency will be created within the Executive Branch and named Agencia Nacional para la Competencia y el Bienestar Económico.
Until the bill passes and the dust settles, this could potentially cause uncertainty among dealmakers.
Outlook
Dealmakers may have started 2025 with an optimistic outlook, but the US position on tariffs has shaken global markets, provoked retaliatory efforts from allies, and added a new level of uncertainty to the market. The prospect of higher inflation will not be welcome news to investors. The implication is that future interest rate cuts could be shelved, reversing the economic progress achieved over the past year.
The situation remains fluid, and only time will tell how the US’s position on tariffs will impact Mexico’s future economic growth. An escalating trade war between the US and its largest trading partner is also now a real possibility.
With the economy on shaky ground and deals facing regulatory challenges, there are reasons for dealmakers to be cautious. However, positives remain. Deal volume, if not value, held up in the first quarter of 2025, while the country’s resilient industrials sector produced some major deals last year and will continue to be hotly targeted. The nearshoring effect, while complicated by political relations with the US, will also continue to bring in investment and drive the market forward.
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