M&A in Mexico: Building for Success vs. Building for Exit

As Mexico's startup ecosystem matures with unicorns like Bitso and Clip, many founders are building with acquisition in mind. This week, we're exploring why this strategy might be fundamentally flawed.

Our analysis reveals surprising insights from founders who successfully exited: Martin A. Mexia Ponce of Payit.mx (acquired by Rappi) and Angel Cisneros of Quiubas Mobile (acquired by Twilio) both emphasize that exits should be byproducts, not goals. Despite fintech dominating Mexico's M&A landscape—driven by the country's 50% unbanked population and banking ROE nearly double that of the U.S.—we uncover why product excellence and profitability remain the true paths to successful acquisitions.

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Nido Indicators ????????

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?? Trade Disruptions: A Hidden Driver of Inflation Trade disruptions from tariffs and geopolitical tensions substantially impact inflation. Research shows that increased costs for intermediate goods lead to a decline in production efficiency and sustained price increases. While barriers on final goods may cause short-term spikes, the enduring effects arise from disruptions in intermediate goods, linking global trade frictions to long-term inflation challenges. (Federal Reserve)

???? Trump Grants Temporary Tariff Relief to Mexico & Canada

President Trump will exempt Mexican and Canadian goods under USMCA from his 25% tariffs until April 2, citing efforts to curb fentanyl and illegal immigration. The move follows market turmoil and industry pushback. Auto and key agricultural imports are spared, while most Canadian energy remains taxed at 10%. (Bloomberg)

?? Mexico's Plan to Match U.S. Tariffs on China U.S. Treasury Secretary Scott Bessent revealed that Mexico plans to implement tariffs on China, aligning with U.S. measures to create a "fortress North America." This initiative aims to restore balance amid the surge of Chinese imports, particularly targeting cars and auto parts. The Chinese embassy criticized these tariffs, stating they breach WTO rules and negatively impact global interests. (Reuters)

?? Anthropic Secures $3.5B to Advance AI Development Anthropic has successfully raised $3.5 billion in a Series E funding round led by Lightspeed Venture Partners, reaching a post-money valuation of $61.5 billion. This brings their total funding to $18.2 billion. The investment will enhance their AI systems, boost research and development, and expand their workforce, following the recent launch of Claud 3.7 Sonnet for improved user experience. (TechCrunch)

?? Microsoft Phases Out Skype, Moves Users to Teams Microsoft will officially retire Skype on May 5th after 14 years, transitioning users to the free version of Microsoft Teams. Users have 60 days to migrate their data, with automatic transfers of message history and contacts. The decision reflects a shift in communication preferences, as Microsoft aims to streamline its consumer services around Teams amid declining Skype usage. (The Verge)

?? The Shift Toward Authentic Digital Communities A recent study by The Verge and Vox Media Insights indicates a pivotal change in online behavior, with consumers moving away from traditional platforms towards intimate digital communities. The survey of over 2,000 US adults reveals declining trust in search engines and social media, as users seek deeper connections. Additionally, many prefer communities that restrict AI-generated content, highlighting a demand for authenticity in online interactions. (The Verge)

?? Testing the Future: Figure's Humanoid Robot Set for 2025 Figure plans to begin alpha testing its humanoid robot, Figure02, in homes by 2025, focusing on tasks like food preparation. However, the company is prioritizing industrial applications, having already deployed a robot at a BMW manufacturing plant in South Carolina due to safety and profitability concerns. (TechCrunch)

?? Tesla Eyes California Ride-Hailing Market Amid EV Sales Dip Tesla Inc. has applied for a transportation charter-party carrier permit in California, aiming to enter the ride-hailing sector as electric vehicle sales falter. This initiative could position Tesla against rivals like Uber and Lyft. While CEO Elon Musk plans to launch autonomous services by year-end, the initial strategy may involve human drivers, reflecting a cautious approach toward future robotaxi operations. (Bloomberg)

?? TSMC's $100 Billion Bet on U.S. Chip Manufacturing Taiwan Semiconductor Manufacturing Co. (TSMC) plans to invest an additional $100 billion in U.S. facilities, collaborating with President Donald Trump to bolster domestic chip production and support AI leadership. TSMC's CEO C.C. Wei announced this initiative alongside Trump, complementing a previous $65 billion commitment. The expansion awaits approval from Taiwanese authorities amid ongoing tariff threats. (Bloomberg)

?? Mercado Libre's Expansion Fuels Economic Growth in Nuevo León Mercado Libre has opened a new distribution center in Apodaca, Nuevo León, with plans for another in Escobedo, increasing its workforce from 1,700 to 3,300. The investment exceeds $180 million by 2025, contributing to a total of $300 million in the state. The company also partnered with the "Hecho en Nuevo León" program to empower local SMEs through its platform, aiming to elevate the state’s economic contribution to Mexico. (Gobierno del Estado de Nuevo León)

?? Mexico's Auto Industry Sets New Export Records in 2024 In 2024, Mexico's automotive sector achieved historic milestones, producing nearly 4 million vehicles and exporting over 3.47 million. The U.S. and Canada accounted for 88.2% of exports, with the Chevrolet Equinox leading at 229,136 units, closely followed by the Toyota Tacoma at 228,890 units. (Mexico Industry)

In-depth with Nido: What we are thinking

Mexican founders have proven their ability to build scalable companies with features attractive to both foreign and local investors. Led by unicorns such as Bitso and Clip, it is evident that the Mexican market space is large enough for ambitious companies with novel solutions to flourish.

While unicorn companies often innovate in relatively uncompetitive areas due to their novel products, a subset of startups focus on solving challenges for larger enterprises. Many founders in the startup ecosystem have chosen to explore these niche markets, sometimes with the strategic goal of securing a lucrative acquisition by a major player.

Although the strategic nature of this approach is commendable, conversations with successful Mexican founders who have exited their companies reveal that focusing on exits as a primary goal is misguided. In interviews with Martín Mexia, founder of Payit.mx (acquired by Rappi), and Angel Cisneros, founder of Quiubas Mobile (acquired by Twilio), they emphasize that exits should be seen as a byproduct of building a valuable company—not the main objective.

M&A History in Mexico

Mergers and acquisitions (M&A) in Mexico have experienced notable fluctuations over the past two decades, with key growth periods driven by macroeconomic trends, regulatory shifts, and increasing foreign investment. The peak year for overall M&A activity was 2014, which saw the highest number of deals, reflecting a surge in investor confidence and sectoral consolidation. Private equity-backed transactions have also played a pivotal role in shaping Mexico’s corporate landscape, with financial services leading sponsor-backed M&A activity, comprising 44.8% of such transactions. The consumer sector follows with 26.7%, demonstrating the strong appetite for scalable businesses with recurring revenue models. The rise of venture-backed startup acquisitions is also evident. Mexico City dominates as the hub for acquired startups, accounting for 73.2% of transactions, followed by Guadalajara and Monterrey, reinforcing their positions as secondary entrepreneurial ecosystems. (Pitchbook and S&P Capital IQ)

From a venture capital perspective, startup M&A in Mexico remains concentrated in high-growth sectors such as financials, TMT, and consumer goods, reflecting broader Latin American investment trends. The most common deal structures involve full acquisitions and strategic buyouts by larger corporates or international firms seeking market entry. The latest deals include acquisitions such as Point B's purchase of Lumston, a digital transformation firm, and United H2's joint venture with GreenH2 LATAM, signaling increasing interest in sustainability-focused businesses. With the ongoing nearshoring trend, Mexico’s startup ecosystem is expected to witness continued M&A activity, particularly in tech-enabled sectors where VC-backed companies can scale rapidly and become attractive targets for consolidation. (S&P Capital IQ)

The Fintech Dominance

It is evident that financial technology companies predominantly lead startup M&As in Mexico. Several factors make these companies particularly attractive to domestic and international investors.

For starters, as an overused phrase in FinTech pitch decks often states, Mexico is extremely underbanked. Cash-based transactions remain the dominating payment option by volume, and half of all Mexican households lack bank accounts (more on Santander). Coupled with a large population and an average age of just 29 years , this creates a prime opportunity for founders to streamline their products and drive the country toward a more bank-centric society (more on INEGI). Additionally, there is a significant opportunity to manage remittances, as these funds represent 4% of the GDP, and 99% of these transactions are conducted electronically (more on Gobierno de México and BBVA).

Another key factor is the high return on equity in Mexican banking, driven by the high costs faced by customers. Banks charge steep fees for basic financial services and transactions and face little competition, leading to higher average interest rates for credit cards, 38.4% in 2024 compared to 22.8% in the United States (more in El Economista and Federal Reserve). As a result, investors are eager to capture a share of these high returns, fueling their interest in acquiring startups that have mastered the logistics of establishing a financial entity in Mexico.

An important component for the dominance of the financial industry overall is that since buyers are interested in leveraging the high returns of traditional banks, some major Latam FinTechs have opted to secure banking licenses to offer complete banking services to Mexican customers. As a result, this trend has also increased the appeal of smaller traditional banks, particularly for their licenses, as evidenced by Ualá’s acquisition of ABC Capital in 2021 (more in Ualá). The same applies to Popular Financial Societies (SOFIPOs); for example, Nubank’s acquisition of Akala was a strategic move that granted it an operating license to accept deposits, transfer money, and issue debit and prepaid cards (more in Leaders League). Ultimately, it is clear that financial entities and startups in Mexico are acquired strategically for their existing permissions and grandfathering provisions, which spare buyers from the lengthy process of obtaining these privileges from scratch.

For Founders

Many founders are captivated by the allure of a successful acquisition—think headline-worthy LinkedIn updates and the promise of early retirement. However, in discussions with Martín Mexia, who sold his company, Payit.mx, to Rappi, and Angel Cisneros, who sold his company Quiubas Mobile to Twilio, both emphasize the importance of focusing on building an exceptional product rather than obsessing over an exit strategy. In essence, prioritizing product excellence is the surest path to a successful acquisition.

In Mexico's traditional M&A landscape, inadequate record-keeping and inconsistent financial practices often create significant hurdles. Many established companies—especially family-owned ones—tend to lack the rigorous reporting protocols expected by potential buyers, leading to extended due diligence periods and rough estimates during valuation. For founders, this broader context serves as a powerful reminder: maintaining organized, transparent data and robust operational practices isn’t just about streamlining a potential sale—it’s fundamental to building a resilient business. By instilling strong financial discipline and operational rigor early on, startups not only become more attractive to acquirers but also lay the groundwork for sustainable growth regardless of whether an acquisition ever comes into play. However, as Mexia emphasizes, founders shouldn’t adopt these practices solely in hopes of an acquisition—they should do so because strong operational practices are fundamental to building a great product. In essence, having a team committed to doing things correctly, without any ulterior motive, is critical for the success of any startup, and good practices should be the norm rather than a mere afterthought. Good practices should not be conditional.

Angel Cisneros outlines three key pillars for success: building a large, profitable, and sustainable business. For Quiubas, high profitability and strict quality control were particularly important, given that they never raised external capital. This allowed the founders to retain full control and maintain their product vision without interference from exterior stakeholders. Their confidence in their product enabled them to turn down four acquisition offers—including one just six months after launch. As Cisneros noted, the company’s profitability gave them the “willingness to walk away at any moment” during negotiations, because they weren’t desperate to be acquired. Their goal to grow Quiubas into a monopoly outweighed the lure of immediate gains from a sale, with a relentless focus on product development fueling their ambition.

Cisneros also highlights a critical point that many founders overlook: acquisitions can turn disastrous. They often bring unexpected expenses for the seller and expose founders to legal complexities and investor-friendly terms that can work against them. These can be so severe that some founders leave empty-handed—as Cisneros warns, “a once-in-a-lifetime opportunity can turn into a nightmare”. Therefore, founders need to ensure their business is profitable enough to absorb acquisition-related costs, maintain sufficient leverage to back out if necessary, and have robust business practices that promote a synergy of high-quality development. Regarding handling governmental uncertainties, Mexía advises that if a company is truly building something invaluable, investors will look past external challenges and continue to recognize the company’s worth.

Product development is the most crucial element in creating an attractive company. While market exposure and connections to potential buyers also matter, the key takeaway is that a product should be so robust that securing continuous capital injections becomes a secondary concern. Top-tier products will attract top-tier investors.

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