African M&A has been characterised by political risk and allegations of fraud over the past 18 months resulting in a slow year for M&A deals across the region. Instability, lack of regulatory clarity and weak economic fundamentals in the continent’s biggest markets worked to limit investor confidence. However, in 2018 the tides are changing and M&A in Africa is likely to see a different story.
On 4th July 2018, Merrill Corporation partnered with Mergermarket to host an African M&A Breakfast in Johannesburg where speakers delved into drivers behind the positive outlook for African M&A in 2018. The session formed part of our series of executive briefings in the Middle East, Africa and Turkey and provided a unique opportunity for local dealmakers to obtain exclusive data and gain insight into major deal drivers in Africa whilst networking with international peers.
African M&A picks up speed
One of the key reasons for deal momentum in Africa picking up, revealed by Peter Cromberge, South African Bureau Chief at Mergermarket, is because of cross-border M&A continuing to flourish by both volume and value. 7 out of the top 10 deals in 2018 have been done by foreign bidders with the majority utilising the Merrill’s data room for speed and simplicity. Cromberge also shared that Energy, Mining, and Utilities is still the driving sector followed by Consumer, Business Services and Technology, Media and Telecoms (TMT).
Despite the political risk factors that have been particularly notable, South Africa is still by far leading the M&A market in Africa in 2018, followed by Kenya with Ghana, Zambia, and Mauritius as emerging target markets. Political uncertainty following the prolonged medical leave of President Muhammadu Buhari significantly undermined investor confidence which may be one of the reasons for Nigeria losing its number 2 position.
Deal Drivers: TMT M&A in Africa
According to Darryl Bernstein, Partner at Baker & McKenzie, deal making in Africa’s TMT sector is expected to surge in the next coming years given a backdrop of a positive global economic outlook and the expansion of technology across industries from emerging markets.
Lack of legacy IT systems in Africa is an opportunity for fresh thinking and, as a result, African countries are developing innovations that could change the world. Ground-breaking technology for space exploration, biomedical science, neurotechnology, artificially intelligent farming and solar energy are just some of the modernisations emerging from the continent.
Because of this technological innovation, the African M&A technology sector is certainly on the rise. A word of warning here, however, is that the TMT deals dominating the market may be gaining traction but deal values are significantly less which will have an impact on M&A overall.
Innovation at every stage in the M&A lifecycle
The financial services industry, globally and in Africa, is facing ever-changing competitive dynamics, as well as increased regulation calling for accountability and transparency. In addition to the technological innovations mentioned earlier, FinTech is transforming the sector and innovation is set to revolutionise M&A and the due diligence processes making dealmakers capable of conducting rapid, secure and compliant M&A with deeper insight and better analytics.
At the event, Merlin Piscitelli, Regional Head of Sales at Merrill Corporation showed attendees how innovations can now accelerate M&A deals across the different stages of the M&A Lifecyle from deal marketing, to due-diligence, to deal closing and post deal integration. Artificially Intelligent powered smart tools, for example, can be deployed to enhance the speed and efficiency of the due diligence process by automating data collection, organisation and data room setup taking away the highly demanding admin work so deal makers can focus on higher value work and the success of the deal
Merrill DatasiteOne is just one of Merrill’s technologically advanced innovations designed and built to deliver quick and seamless solutions with its new SaaS and application based approach and microservices architecture.
If you want to find out more about how Merrill is innovating African M&A contact me on the details below.
Director - Merrill DatasiteOne
+ 44 (0) 207 422 6272 Direct
+ 44 (0) 7917 616 829 Mobile