Companies cautious to invest in Mexico
So far in 2019, companies have maintained "a cautious position" to make new investments in Mexico or make acquisitions and mergers with other companies.
The reasons include the economic downturn, the decline in both sovereign and corporate credit rating in important sectors for the local economy, but also by global macroeconomic trends, said the consultancy Willis Towers Watson, specializing in business, sales and human capital.
The firm, which has operations in 140 countries, and the Cass business school have been conducting since 2008 the Quarterly Operation Performance Monitor where they measure the increase or decrease shown by mergers and acquisitions of companies around the world.
The main results of its report for the second quarter of 2019 show that in North America, Europe and Asia-Pacific "transaction volumes reported the lowest level since the second quarter of 2009", the year in which the global financial crisis occurred.
For the first time since the monitor was launched, the results of mergers and acquisitions in the world had a lower performance compared to the previous year and globally they add up to 7 consecutive months of lower performance, an unprecedented fall. In addition, it is the first time in five years that there were no complete mega deals in the second quarter of 2019, referring to those involving transactions of more than 10 trillion dollars.
Alberto Mondelli, business leader and consultant in Human Capital, Profits and Mergers and Acquisitions of Willis Towers Watson in Latin America, said this type of transaction represents a barometer of business confidence. The rapid drop in the volume of transactions is due to the brutal impact caused by geopolitical, commercial and tariff uncertainties and the situation will prevail for the rest of 2019 with the announcement of fewer merger and acquisition agreements.
The monitoring shows that the Asia-Pacific region shows the worst performance, with registered mergers and acquisitions yielding less than 7.9 percentage points. Next come Europe and North America with annual declines of 4.1 and 3.7 percentage points, respectively.
Jana Mercereau, Head of Corporate Mergers and Acquisitions at Willis Towers Watson for Great Britain, noted that the global Mergers and Acquisitions market peaked in 2015 and has been on the radar ever since, as regulations become stricter, protectionism and political uncertainty continue to thwart negotiations.
Most businesses underperformed the index
The highest performance in the second quarter of the year was below 11.1 percentage points, but intraregional and national deals are below 8.7 and 9.9 points, while in a reversal trend, the transregional, large, cross-border and fast bids exceeded 6.3 points for the first two cases and 5.7 and 4.9 points for the last two.
Jana Mercereau pointed out that both corporate transparency and the digital issue are factors that will influence the market because large companies try to assimilate technology to be more efficient and better reach end-users by buying boutique firms, which translates into fewer megadeals of billions of dollars.
Source: La Jornada