The Rewards and Risks of a Cross-border Mergers and Acquisitions

Based on a study conducted by Deloitte where top executives on investing committees responded their survey, it is identified that ​cross-border mergers and acquisitions (M&A) represent an instrument to gain access to new markets and customers. According to global trends the M&A transactions are increasing. However, strategic buyers and financial sponsors ought to reconcile the rewards and risks of undertaking such a sophisticated utensil for inorganic growth.

The results from the survey consider over 500 executives with cross-border M&A experience across regions, industries in the United States, Canada, APAC, EMEA, and LATAM. Results showed that companies are more competent and experienced in cross-border M&A recognizing that Post Merger Integration (PMI) is critical to increase the odds of a successful operation. These acquiring companies rely on external advisors for the due diligence and strategic planning to assess synergies and realization monetization potential. Nonetheless, there are risks on the global economic and political turmoil.

The main reasons for cross-border M&A include a slowdown in core markets’ organic growth and the need for diversification. Additional elements such as taxation and earning management across different countries also play an important role influencing the appetite for M&A.

The main drivers as rewards for cross-border M&A are portfolio diversification, cost synergies, acquiring intellectual property, access to new talent, adding distribution networks and production capacity, as well as growth in new geographic markets. On the other hand, the top risks include tax law, political stability, culture and talent, and business risk.

By Félix Cárdenas, professor at the Departament of Entrepreneurship and Technological Innovation of EGADE Business School.

Key Deals

JUL 2023

• Mapfre, S.A. announced the acquisition of Insignia Life S.A. de C.V for US$96.1 M / Buyer: Mapfre S.A., operates as an insurance company / Target: Insignia Life S.A. de C.V., operates as a life insurance company
• Be Grand closed the acquisition of 6 buildings in Mexico City and Monterrey for US$325.0 M / Buyer: Be Grand, operates as a real estate company / Targets: 6 buildings in Mexico City and Monterrey
• Ocesa announced the acquisition of Páramo Presenta / Buyer: Ocesa, operates as a music event production company / Target: Páramo Presenta, offers live musical shows

AUG 2023

• FEMSA sold Envoy Solutions to BradyIFS for US$1700.0 M / Buyer: BradyIFS, distributes janitorial and food service supplies / Target: Envoy Solutions, distributes cleaning supplies, food service equipment, packaging materials / Seller:  FEMSA, operates as a multinational beverage and retail company
• Terrafina closed the acquisition of seven buildings in Tijuana and two buildings in Toluca for US$220.0 M /  Buyer: Terrafina, operates as a real estate investment trust / Targets: Seven buildings in Tijuana and two buildings in Toluca
• Nazca announced the acquisition of 49% of Barça Studios for US$192.6 M / Buyer: Nazca, operates as an early-stage venture capital firm / Target: Barça Studios, centralises the creation, production, and commercialisation of FC Barcelona’s entire audiovisual range

SEP 2023

• Grupo Lamosa, S.A.B. de C.V. closed the acquisition of Baldocer for US$453.0 M / Buyer: Grupo Lamosa, manufactures and sells ceramic tiles, sanitary ware, and ceramic adhesives for the construction industry / Target: Baldocer, manufactures, designs, and sells ceramic floor and wall tiles
• CEMEX, S.A.B. de C.V. announced the acquisition of Kiesel / Buyer: CEMEX, produces and sells cement, ready-mix concrete, aggregates, urbanization solutions,
  and other construction materials / Target: Kiesel, manufactures and distributes mortars and adhesive products for the construction materials industry
• Kapital closed the acquisition of Banco Autofin de México for US$50.0 M / Buyer: Kapital operates a treasury and credit platform / Target: Banco Autofin de México, offers banking and credit products to meet savings, lending and financial services need

The author of this report is Sergio García del Bosque, Managing Director of Seale Associates (sgarcia@sealeassociates.com).

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