Large-Ticket Mexican M&A Seen Growing

Heightened liquidity in Mexico’s markets could mean more M&A deals at the larger end of the scale, amid an overall pickup, says the co-founder of one of the country’s newer boutiques. “There are a lot of middle-sized M&A transactions getting done, and we expect to see a couple of the large deals getting done in the second half of the year,” Ricardo Cervera, partner at boutique investment bank Vace, tells LatinFinance. Consolidation is driving activity of all sizes, especially in sectors such as telecoms and media. Also, liquidity is on the rise in Mexico, despite volatility, and this should help bring about bigger ticket M&A deal going forward. Cervera, a former head of Mexico investment banking at Citi, started the shop at the beginning of last year with Carlos Vara, former head of LatAm investment banking at Citi. They are advising condom manufacturer Sico on a sale to a US publicly-traded buyer which he declines to identify. The deal should close in the next 2 months, for about $120m Cervera says. About 50%-60% of Vace’s business is in M&A, with the remainder in private debt placements, CCDs and restructurings. Transactions vary from $30m-$600m in size, he says. The firm is also tying up a structured debt transaction for payroll discount lender Credito Maestro, borrowing from a group of US hedge funds, for about $100m. This follows an earlier $70m raise with a local hedge funds. Among the firms larger advisory roles have been on OHL’s MXP6.5bn financing of the Viaducto Bicentenario highway, and the $250m sale of control of Farmacias del Ahorro. Cervera believes there is room for the increasing number of boutiques in Mexico. He sees new opportunity in the CCD market and from the Afores’ new ability to play in small IPOs. However, he says it is important for smaller shops to be wary of entering deals that are particularly labor intensive, drag on for long periods of time, and may end up not happening.