We have good news if you want to work in M&A in Africa.
Investment bankers say that global investor appetite for M&A deals in sub-Saharan Africa is increasing and that the value of deals this year could exceed the record $44bn achieved last year – which in turn was double the 2009 figure. “We expect a pick-up in M&A activity,” said Citigroup analysts in a recent research note.
The Africa growth story is attracting global investors, especially from the BRIC bloc (Brazil, Russia, India and China) which South Africa is increasingly seen as a part of. Bruce Webber, joint head of M&A at Standard Bank says both South African corporates and international firms are looking to make acquisitions in Africa, “across all sectors.”
Local investment banks are holding their own: “M&A markets are booming because of the interest in Africa from international investors, but South African companies are also growing their African footprint rapidly,” says Tine Erasmus, general manager of Network Finance, a specialist recruiting firm in Pretoria. “There is definitely an increase in demand for M&A specialists as well as for other candidates with due diligence experience.”
Investment banks are poised to benefit from the deal flow, and opportunities abound for experts in the sector.
So far this year, Investec has topped the rankings of M&A advisers and is the top earner with Deutsche Bank in second place. But others are busy too: Yianni Pouroullis, head of advisory and distribution at Nedbank Capital, says there has been an increase in corporate finance activity such as capital raising and lending and therefore his division has a “healthy pipeline of transactions.” Alan Pullinger, CEO of Rand Merchant Bank, says that “transactions are taking much longer to consummate, they are being considered a lot more deeply. But we have been busy”.
It is hoped that the recent R16.5bn acquisition by Walmart Stores of the US of a 51% stake in Massmart, a South African retailer, will set the trend, despite the government’s intervention in order to safeguard employment. The Competition Authority gave the long-awaited green light to the transaction in June on condition there be no job cuts for two years.
The biggest deal announced this year is the $1.3bn acquisition of the Victoria and Albert Waterfront shopping mall in Cape Town by Growthpoint Properties and the Public Investment Corp, followed by Vale SA, a division of the Brazilian mining group, buying Metorex, a South African copper producer, for $1.1bn. Jinchuan Group, the biggest Chinese nickel producer, in July made a rival offer of $1.36bn for Metorex, which has mines Natural resources and the mining sector, Africa’s traditional magnets, will continue to dominate M&A activity, according to Steven Kilfoil, director of corporate finance at Grant Thornton.
Nicol Degli Innocenti