More focus on deals offshore
Mergers and acquisitions league tables show signs of blue sky through the clouds
SA’s economy remains in the doldrums as drought conditions and a sick rand knock shattered sentiment, but this does not mean 2016 should be written off as a disaster.
One trend is for offshore deals to feature more strongly than domestic ones. But opportunities exist and it will be up to companies and advisers to spot them early and deliver bespoke solutions that go the extra mile in a rapidly evolving market.
The latest global and regional mergers and acquisitions league tables by Mergermarket, released last month, bear out the prospect of a little blue sky nudging through the clouds. They also seem to bear out the recent refrain of Finance Minister Pravin Gordhan for SA not to panic, despite growth being too slow and the risk of a rating downgrade looming large if nothing is done. The solution is concerted action by government and the private sector to create the foundations for growth, and it is positive that Mr Gordhan is actively looking at ways for government to improve economic conditions.
The outlook of corporate lawyers about the deal pipeline should not be discounted during the debate about what the future holds. These deals are crucial in this environment as they relate to what is about to happen in the real economy.
I would be very worried if corporate departments started firing rather than hiring, but this is not the case. Firms have become exceptionally competitive over the past year in their pursuit of skills in this sector.
According to the Mergermarket statistics, which are based on trans- actions over $5m which are on Mergermarket’s mergers and acquisitions deals database, with a cut-off date of December 31 last year, it was a record year for global mergers and acquisitions with regional records being broken, such as the US and Asia posting their highest values and some of the largest deal announcements.
SA features strongly on the list following Anheuser-Busch InBev’s $120.3bn acquisition of UK-based SAB Miller, a company which has its roots in SA via subsidiary South African Breweries. This, however, was only the second biggest deal of the year. In a major boost to the local market, Anheuser-Busch InBev listed on the JSE last month at a market cap of R3.1-trillion.
The total value of mergers and acquisitions reached a record level in late November after the announcement of the world’s third-largest merger and acquisition transaction in history — Pfizer’s $ 183.7bn purchase of Allergan. These deals boosted total merger and acquisition values to $4.28-trillion last year, 16.6% higher than the previous 2007 peak and 29.9% above 2014.
There have only ever been six transactions above $100bn, two of which were announced last year (Pfizer/Allergan, Anheuser-Busch InBev/SABMiller). There were 10 transactions above $50bn that amounted to $814.6bn, much higher than 2014’s $245.9bn. As a result, these above $50bn announcements