MEXICO: An Introduction to Corporate/M&A

Mexico’s 2025 Economic Outlook: Growth Amidst Challenges

The economic landscape of Mexico in 2025 is poised for growth, signalling a potential uptrend in M&A transactions, despite the legal, economic and social challenges at the national level.

According to a study published by TTR Data, in November 2024 Mexico’s M&A market recorded a total of 307 M&A transactions, with an aggregate transaction value of USD15.1 billion. While this reflects a 10% decrease in the number of transactions compared to the previous year, TTR Data’s study suggests that the value of the transactions increased by 20% in this period, meaning that M&A deals in Mexico, while decreasing in quantity during 2024, are being executed at a larger scale. This trend is expected to continue in 2025.

At the same time, Claudia Sheinbaum’s election as President of Mexico brought some volatility to Mexico’s financial markets, leading to significant fluctuations in the stock market and Mexico’s legal currency (peso). Global investors have voiced their concerns regarding supermajority control of the Congress by Sheinbaum’s political party, generating fear of potential authoritarian tendencies going unchecked by an effective opposition. These concerns have been reinforced by proposed legal and constitutional reforms that could affect, among other things, Mexico’s judicial system, autonomous organisms, and the country’s compliance with its commitments under the US-Mexico-Canada Agreement (USMCA), particularly in areas such as labour rights and environmental regulations. All this could have implications for future business operations in the country.

However, while the political shifts are always a relevant factor and may raise questions, Mexico continues to be a resilient economy, attractive to foreign investment and global economic trends, such as the nearshoring phenomenon. It has a positive outlook and an evolving landscape filled with innovative ventures and collaborative success.

The Nearshoring Surge

Mexico’s M&A landscape is currently experiencing a surge, driven by the global trend of nearshoring (bringing production closer to key markets). The country’s diverse economy, strategic location and competitive manufacturing costs make it an increasingly attractive destination for foreign investment. Despite domestic and global challenges, Mexico’s economy continues to diversify and expand, offering several cost-efficient and reliable alternatives to distant offshore locations. This growth potential in Mexico’s M&A landscape presents a promising outlook for investors.

Mexico stands out with its strategic advantages, as multinational companies seek to mitigate the risks of overreliance on distant markets. These include trade agreements, developed infrastructure, and ongoing industrial growth. Such factors are key drivers of M&A activity, demonstrating Mexico’s perseverance in the face of political and economic challenges, which is particularly evidenced in key sectors such as automotive, electronics, technology, retail, fintech, energy, natural resources, and real estate, providing a stable and promising market for potential investors.

Some of the most relevant transactions executed in Mexico during 2024 were:

• the acquisition by Grupo Televisa of the equity stake held by AT&T USA in Sky Mexico, a satellite-internet broadcaster in LATAM;
• the acquisition by Grupo Bimbo of Amaritta Food, a Spanish company which produces gluten-free bread;
• the acquisition by Grupo Axo, a Mexican company that commercialises clothing, accessories, cosmetics, and household products, of the Guess brand in Chile and Peru, from the Chilean company Rambrands; and
• the disinvestment transaction in Imbera and Torrey, a refrigeration and food service equipment company, by FEMSA and Mill Point Capital LLC.

On the other hand, capital generated in Mexico is being invested abroad as well, as evidenced by the recently announced delisting of the US based retailer Nordstrom, where the Mexican retailer Puerto de Liverpool will have a participation close to 50%.

Legal and Judicial Reform

The judicial reform to the Constitution of the United Mexican States, which includes reducing the number of judges and introducing popular elections for federal ministers and judges, has raised concerns about Mexico’s adherence to its commitments under the US-Mexico-Canada Agreement (USMCA). The popular vote for ministers and federal judges could potentially affect the stability of the judicial system in Mexico, leading to a departure from the independence and transparency of judges. This shift could undermine professional skills and merit-based promotions, politicising the administration of justice and eroding the autonomy of the three branches of the Mexican government (executive, legislative and judicial). From an M&A perspective, one possible course of action might be to rely more on arbitration as the preferred dispute resolution mechanism. In this case, the involvement of the judicial system is expected to be limited solely to the enforcement of a ruling issued through arbitration, thus avoiding the review and analysis of the subject matter of the dispute by the traditional court system.

With the intention of bureaucratic simplification, several autonomous organisms were eliminated at the constitutional level, with their authorities/powers being absorbed directly by the executive branch of the government. These amendments affect the areas of energy and hydrocarbons regulation, competition and antitrust enforcement, telecommunications and broadcasting, access to information and transparency regulation, among others. While the overall sentiment is that the new government bodies will function within the existing general framework, subject to amendments to the secondary legislation, their efficiency and professionalism is expected to decrease resulting in delays in the relevant procedures.

Another significant development is the reform to the Amparo Law. Under this reform, judges will no longer be entitled to suspend the application of the claimed act of authority to all the persons who could be affected by such act of authority. Instead, the corresponding suspension may only be granted to the person who filed the Amparo action.

Not only do these reforms raise concern among foreign investors and businesses, but they could also significantly increase the level of scrutiny, due diligence, and regulatory compliance required, adding a new layer of complexity to cross-border transactions.

Considering the above, it is essential to prepare for the new legal challenges stemming from changes to legislation and prioritise due diligence and risk assessment processes. With the introduction of new rules and procedures, businesses must implement proactive strategies that enable them to mitigate risks and effectively adapt to this evolving environment.

***

Despite the legal, economic, and social challenges faced at the national level, the M&A market in Mexico for 2025 is expected to continue its steady rise. Engaging with local legal experts that specialise in navigating Mexico’s legal system and the relevant amendments thereto is key.