SA resilient in tough merger, acquisition year

SOUTH Africa’s cross-border mergers and acquisitions were resilient in the second quarter of this year, according to the Baker & McKenzie quarterly cross-border mergers and acquisitions index.

Political and economic volatility and uncertainty had depressed mergers and acquisitions, leading to subdued business activities, according to Morné van der Merwe, head of Baker & McKenzie’s Johannesburg Corporate and Mergers and Acquisitions Practice.

The index showed that globally the value of cross-border mega deals – those above $5 billion (R72bn) in value – fell significantly in the first half of this year. “While there were 21 mega deals struck in the first half of 2015 with a total value of $296bn the 18 (this year) are worth 23 percent less at $228bn and only three of those occurred in the (second quarter),” Baker & McKenzie said in a report released yesterday.

Van der Merwe said after a record year last year, UK’s vote in favour of leaving the EU, political uncertainty in the US and subdued macroeconomic environment globally weighed on deal-makers’ confidence. “Even with this though, we continue to see high volumes of deals – just fewer of the mega transactions – and many multinationals are continuing to make acquisitions in support of their long-term strategies,” said Van der Merwe.

He said, the shock that followed UK’s vote had positive results for South Africa, with significant inflows into bonds and equities.

He said political uncertainty in South African was a persistent concern for businesses and investors. “However, the outcome of the beating taken by the markets following the recent depreciation of the rand, and the subsequent engagements between government and business, is that government is more responsive to market concerns. This has inspired confidence.

“Going forward, the smoothness of the local government elections, will again confirm South Africa’s commitment to the democratic enterprise. On infrastructure, and power specifically, the fact that the winter has been relatively incident-free from load shedding will also inspire confidence.

“We therefore expect South Africa become an attractive destination for investors once again provided that there is political stability, regulatory certainty, a stable energy supply, stable labour and affordable regional integration,” he said.