M&A activity in Mexico slows as tariff uncertainty shifts dealmaker strategies

28th March 2025 11:18 AM

By Jessica Bigio, Adriana Curiel, Leonardo Peralta and Izaz Ansari

Dealmakers in Mexico are putting deals on ice and reassessing their priority sectors as they navigate the uncertainty of the tariffs announced by US President Donald Trump.

Some players with deals in progress are buying time, waiting for the outlook to clarify, while those behind new acquisitions and sales are struggling to reach an agreement on valuations, said bankers, PE partners and industry sources.

A 25% general tariff on Mexican imports has been postponed twice, first on February 3, following talks with Mexican President Sheinbaum. The pause was then extended until April 2, with the possibility of adjustments based on progress.

The most consequential tariffs so far include a 25% duty on non-USMCA-compliant imports from Mexico, implemented on March 4, and a 25% ad valorem tariff on all aluminum imports from Mexico, effective March 12, as pointed out by Pedro Canabal, partner at Baker Tilly’s Mexican office.

They also include the imposition of a 25% tariff on all vehicles not produced in the US, effective April 2, announced by President Trump on March 26, for which scope and possible exceptions are yet to be clarified, as at the time of publication.

The ambiguity surrounding these measures has made 2025 a slow year for mergers and acquisitions in Mexico, following a sluggish 2024, according to Ricardo Perez Vas, Director at investment banking and advisory firm 414 Capital.

“There is a lot of caution; no decisions are being made, neither forward nor backward,” Perez Vas stated.

In the first bimester of 2025, there were only three deals reported in the country, collectively valued at USD 135m, while in the same period in 2024, 18 deals were reported with a collective estimated value of USD 3.8bn, according to the Mergermarket data.

Chart showing monthly M&A deal volume and deal count in Mexico.

Automakers seek clarity

Investors are already fine-tuning their game plans. A global private equity firm that prefers to remain anonymous has chosen to distance itself from targets related to the automotive and auto parts sectors in Mexico, as well as from companies involved with construction products.

“These are sectors that we would typically target, but for now we’ve decided to turn them off,” the PE director said.

Imposed tariffs on steel and aluminum products affect Mexican automotive industry exports valued around USD 20bn, according to an analysis made by Mexican public policy observatory IMCO.

The measure is poised to hit the auto parts sector, as it affects three tariff chapters: Chapter 87, which covers bumpers, stamped parts, body parts, and suspensions; Chapter 84, which represents parts for air conditioning systems; and Chapter 83, which consists of hinges, cylinders, supports, and other accessories, said Gabriel Padilla, Managing Director of the National Auto Parts Industry (INA).

The three categories represent Mexican exports to the US worth around USD 11.5bn, which would be subject to additional tariffs of approximately USD 2.9bn, Padilla added.

The immediate response from the industry to the tariff announcements was to move inventory to the US to avoid holding stock. Companies in INA are now focusing on reducing costs and restructuring contracts to shift the burden of new tariffs onto manufacturers, who will then pass it to US consumers, Padilla pointed out.

“Many M&A transactions have been halted because of this; there will be no investments in that sector until there is certainty, as you need to have a very large margin to withstand it,” a Mexico-based investment banker said.

Other industries that also rely on steel and aluminum derivatives, such as aerospace and consumer electronics, are expressing concern, while they also face the complexity of breaking down the composition of their products to determine whether they should be taxed or not, Turenna Ramirez, corporate trade attorney in Holland & Knight’s Mexico City office and VP at the International Chamber of Commerce Mexico, stated.

Saved by the bell

The current environment continues to be attractive for long-term strategic M&A deals in sectors related to healthcare, from pharmaceuticals, hospitals, clinic laboratories, to senior care providers, bankers said, adding that a large percentage of the Mexican population is aging and will require special care.

Last December, Mexico’s Grupo Empresarial Angeles (GEA) closed the acquisition of Laboratorios Kener for USD 200m, adding over 140 pharmaceutical products to GEA’s portfolio.

Laboratorio Clinico Colcan, a Colombian provider of clinical laboratory services, completed last February the acquisition of AIMSA, a Mexico-based laboratory, with OneToOne acting as financial advisor.

Consumer product companies, as well as corporates operating in the agroindustry could also benefit from a shift in the investment strategies of buyers, bankers agree, noting that the latter is sensitive to exchange rates and is more affected when the peso is strongest.

There are also a host of firms that thrive on buying low, such as private equity firms. “We hope that, in time, a buyers’ market will emerge, with investment and acquisition opportunities at attractive prices,” the director of the global PE firm said.

The sector is, however, partly affected by the difficulties buyers and sellers are facing in agreeing on asset prices, as buyers are reluctant to take on the risks in valuations, while sellers insist that the uncertainty is temporary, he added.

Tariff uncertainty raises doubts about the future of the much-discussed nearshoring boom in Mexico, as it was expected that businesses, mainly from Asia, would move manufacturing operations to Mexico to avoid tariffs, said Emilio Arteaga, trade law partner at Mexican law firm VTZ.