Strategic Decisions for Mexican Companies: Selling or Acquiring

In Mexico's competitive business landscape, medium-sized and family-owned companies face two of the most significant decisions in their life cycle: selling the business at the right time to maximize its value or acquiring another company as part of an expansion strategy. Both options present significant challenges and, at the same time, unique opportunities to strengthen an organization’s position in local and international markets.

Both, selling or acquiring a business, require a strategic approach, a deep understanding of the economic environment, and careful planning that allows companies to capitalize on changing market conditions. But how can decision-makers identify the ideal moment to sell, and what factors should they consider when acquiring a company, be it to strengthen their business in the domestic market or to expand into another country?

Deciding to Sell: When Is the Right Time?

Selling a business is a complex decision often tied to the goal of maximizing its valuation. However, in a dynamic economic environment like Mexico’s, this approach can be fraught with risks. External factors such as regulatory reforms, interest rate fluctuations, or shifts in market demand can quickly affect the perceived value of a business.

For instance, the recent reconfiguration of global supply chains and the rise of nearshoring in Mexico have increased international investor interest in key sectors such as advanced manufacturing, energy, and technology. These trends could represent a window of opportunity for business owners seeking to sell under favorable conditions.

However, the success of a sale does not rely solely on finding the "perfect moment." It also requires strategic planning that considers:

• The business' financial performance: Is it showing sustained growth that is attractive to buyers?

• Market dynamics: Are there changes in the industry that heighten buyer interest?

• Long-term impact: Does the sale ensure the company's legacy and protect its employees?

Having an independent board of directors can be critical in a divestiture as directors can make objective decisions based on data and analysis while minimizing the influence of emotional factors.

Domestic or Transnational Expansion Strategies

On the other hand, for Mexican companies seeking to diversify risks and strengthen their competitive position, acquiring a company in the local market or in another country can be a transformative strategy. This approach enables companies to gain immediate access to new markets, acquire valuable assets, such as established brands and distribution networks, and benefit from operational synergies offered by a well-planned acquisition.

A notable example is Grupo Bimbo, which has consolidated its global leadership through strategic acquisitions in the United States, Europe, Africa and Asia. These moves have not only diversified its geographic presence but also provided access to new technologies and know-how, and strengthened its competitiveness in ever-evolving markets.

However, acquisitions are not without challenges. Before proceeding, companies must:

• Evaluate the regulatory environment: Are there legal or regulatory barriers that could affect the transaction?

• Analyze cultural and operational compatibility: Are the corporate cultures compatible, and can they be integrated seamlessly?

• Conduct financial, legal, and tax due diligence: Audits, cash flow analyses, accurate valuation models, and a thorough review of legal and tax contingencies are essential for making informed decisions.

Additionally, a well-defined integration plan that includes retaining key talent, aligning processes, and effective communication can make the difference between a successful acquisition and a problematic process.

The Role of Current Trends in Decision-Making

In today’s context, both selling and acquiring businesses are influenced by global trends that create unique opportunities, such as:

• The rise of nearshoring: Mexico's geographic proximity to the United States and the reconfiguration of supply chains have increased foreign investment in strategic sectors.

• The growth of innovative sectors: Technology, fintech, and energy continue to attract foreign and domestic capital due to their exponential growth potential.

These trends not only facilitate attracting potential buyers but also offer Mexican companies an ideal framework to expand through strategic acquisitions in Latin America and beyond.

On the other hand, there are two factors that have caused some foreign investment projects to be put on hold:

• Regulatory reforms: Recent decisions to prioritize public sector dominance in Mexico’s energy sector pose challenges due to uncertainty as to the availability of electricity to sustain a nearshoring boom.

• Threat of US tariffs: Consensus expectations are that current tariff threats might be implemented for a short time frame as a negotiating tactic; however, some investors are following a “wait and see” approach.

Strategic Planning as the Key to Success

Whether a Mexican company is considering selling to maximize its value or acquiring another company to expand its reach, success lies in well-founded strategic planning. This includes:

1. Defining clear goals that align decisions with long-term objectives.

2. Continuously monitoring market trends and anticipating changes.

3. Collaborating with expert advisers in mergers and acquisitions to minimize risks and maximize outcomes.

In a business environment like Mexico’s, which combines a dynamic economy with significant growth potential, companies have a unique opportunity to make strategic decisions that position them as leaders in their respective industries.

Is your company ready to take the next step toward growth and expansion? A well-executed sale or acquisition not only strengthens an organization’s position but also ensures its legacy in an increasingly competitive market.