Investec sees M&A revival

ELEVATED INTEREST: ‘RENEWED OPTIMISM’ IS EXPECTED TO PULL GLOBAL PLAYERS TO SA

Bloomberg

Mergers and acquisitions (M&A) in South Africa are set to rebound this year as the $405 billion (about R7 trillion) economy starts to show signs of recovery, according to Investec Plc.

As macroeconomic metrics improve around the world, South African companies are likely to expand abroad while overseas firms explore attractively priced assets in the local market, according to Marc Ackermann, head of corporate finance and co-head of investment banking for the country at the specialist lender with operations in the UK and SA.

“We’ve seen a renewed optimism from our clients in looking at opportunities,” Ackermann told Bloomberg News.

Rising interest rates and geopolitical risks have weighed on global deal volume, which slumped to $2.9 trillion last year, the lowest since 2013.

In SA, completed M&A deals collapsed almost 90% to $1.9 billion last year from the previous 12 months, according to data compiled by Bloomberg, as infrastructure challenges including power outages added to investor concerns on top of higher borrowing costs. But the outlook is more positive now, Ackermann said, adding interest rates have peaked while the power crisis has started to ease.

Although the looming elections – before which several opinion polls show the ANC is on course to losing its national majority for the first time since the end of White-minority rule in 1994 – would create a “little bit of short-term noise”, there’s more room for optimism, he said.

That’s “really coming from a platform where our clients are being able to better understand what the prospects look like in both the short to medium term, coming from a world in the last 12 to 18 months where they had very little certainty”, Ackermann said.

There’s “certainly an elevated interest for both our corporate and financial clients to deploy capital into opportunities”.

Investec, whose shares are listed both in London and Johannesburg, acquired a majority stake in European adviser Capitalmind Group last year to help beef up its M&A and corporate finance team to 200.

Anaemic growth

The International Monetary Fund (IMF) forecasts SA’s economy to grow 1% this year and 1.3% in the following 12 months. That’s only a slight improvement from the less than 1% gain last year, which was the slowest since a contraction in 2020.

The anaemic pace of recovery would push local companies to diversify overseas where they could tap faster growth, Ackermann said.

This week, the IMF raised its outlook for global growth this year to 3.1%, up from an earlier prediction

The outlook is positive now as the power crisis has started to ease

of 2.9%.

“There certainly has been an increase in consideration for diversification of earnings offshore,” he said.

Very few SA corporates can afford billion-dollar deals now, but a pickup in activity is likely in the mid-market segment. For global companies, valuations could be alluring as the country, with its level of industrialisation, offers a springboard into the rest of the continent, he said.

Ackermann sees rising interest in pharmaceutical, retail and consumer sectors, as well as in the renewables and digital infrastructure spaces.