More fo­cus on deals off­shore

Merg­ers and ac­qui­si­tions league ta­bles show signs of blue sky through the clouds

Business Day - Business Law and Tax Review - - FRONT PAGE - EVAN PICK­WORTH

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

Pic­ture: iSTOCK

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