Mexico, Indonesia, South Korea and Turkey, already being clumsily referred to as the “Mikts”, each account for more than 1% of global GDP and should therefore be taken seriously, according to Jim O’Neill, the Goldman Sachs economist who coined the term Bric. In the coming weeks Financial News will examine the mergers and acquisitions market in each of these countries. This week we start the series by looking at Mexico.

For a few weeks at the beginning of last year Mexico was ranked ahead of the US - the world's largest economy and consistently the most active market for mergers and acquisitions - in global M&A rankings. América Móvil, the telecoms group owned by Mexican magnate Carlos Slim, had launched concurrent bids for domestic telecoms rivals Carso Global and Telmex Internacional worth a combined $29.6bn; and Dutch beer maker Heineken had announced an $8.1bn bid for Femsa, Mexico's largest brewer. By the beginning of February the US had reclaimed its usual place at the top of the table. But activity in Mexico remained buoyant for the next 12 months and 2010 ended up being a record year for M&A in the country. Growth in deal activity in Mexico has coincided with the tenure of pro-business conservative President Felipe Calderón since 2006. After five years in which the country saw fewer than 100 deals, there was a 50% jump in 2006 to 150 transactions and deal volumes have remained at that level. Calderón has brought in financial reforms to speed up the M&A process and modernise the country's capital markets. The value of deals has fluctuated more wildly, due to the absence of any particularly large transactions in 2008 and 2009, but bankers in the region suggest the market is now more open than ever before. Ricardo Pérez, partner at Mexican boutique investment bank Pablo Rión Y Asociados, said: "Activity has been growing pretty steadily over the past five years, driven by a combination of domestic companies investing in the US and further afield, and international corporations seeking out Mexican acquisitions as a means of accessing emerging markets growth. We expect that growth to continue." Opportunities to fund domestic and cross-border transactions are available. Debt capital markets in Mexico are well developed and companies are able to finance acquisitions by issuing bonds to a large institutional investor base that looks after the pension funds of a population of more than one hundred million. Equity capital markets have traditionally been less prominent, in part because company ownership tends to be highly concentrated, leaving comparatively little free float. With such high investor demand, issuing debt is preferable to issuing equity and diluting shareholders' existing stakes. While dealmaking in Mexico is increasing, it is doing so from a low base and there are structural reasons why the M&A market in the country is unlikely to explode to the same extent as other growth markets, such as South Korea and Turkey, have in recent years. Power of the oligopolies Corporate Mexico continues to be dominated by large conglomerates, and the market in most sectors tends to be concentrated in the hands of large, powerful companies. Martin Sanchez, head of Latin America M&A at Bank of America Merrill Lynch, said: "Oligopolies, which have developed over several decades, tend to dominate and that has led to fewer opportunities for inbound M&A when compared to other countries. It is still difficult for global corporations to find meaningful opportunities to invest in Mexico with any degree of scale." As a destination for western investment, Mexico also suffers in comparison with other growth markets. While GDP grew by 5% last year, it fell by 6.5% in 2009, and is forecast to grow by less than 3.5% in 2011. The UK, by comparison, grew by 1.5% in the first nine months of 2010, while China grew by more than 10%. But Mexico has other attractions, not least its relative stability. Pérez said: "The macro-economic picture is generally very good. Mexico has comparatively little debt, inflation is very stable and growth is steady but controlled." While inbound M&A is restricted by a lack of available assets, the prospects for outbound M&A are better, bankers say. Mexico's large conglomerates, which have amassed sizeable cash reserves, are proving willing to invest outside their domestic market and in the US and across Latin America in particular. Cement group Cemex has been an active acquirer of foreign assets in recent years and in 2007 acquired Australian rival Rinker for $14.2bn; Grupo Bimbo, the world's largest bakery group, acquired the bakery assets of US household name Sara Lee for $1bn in November 2010, having acquired the US subsidiary of Canada's George Weston for $2.4bn; conglomerate Alfa, which has businesses in petrochemicals, industrials, food and electronics and telecoms, is particularly acquisitive. In October it announced the acquisition of a number of plastic assets from US group Eastman. Sanchez said: "Mexican companies had traditionally been very comfortable playing in Mexico, but less interested in buying abroad with very few exceptions. However, over the past few years we have seen a significant change, with some of the large Mexican conglomerates actively making foreign investments, in particular in the US and Latin American markets."