Merger activity ‘expected to fall’
MERGER and acquisition activity in SA is expected to drop by as much as 40% this year, owing to a dearth of investors due to global uncertainty, Standard Bank said yesterday.
MERGER and acquisition activity in SA is expected to drop by as much as 40% this year, owing to a dearth of investors whose appetite for acquisitive growth has been sapped by local and global uncertainty, Standard Bank said yesterday.
Brad Webber, co-head of mergers and acquisitions at Standard Bank’s corporate and investment banking unit, yesterday said muted optimism about the country’s growth prospects was particularly to blame for the low deal activity.
However, South African companies were beginning to scout for deals in East and West Africa, he said in an interview.
SA’s gross domestic product is expected to be less than 2.7% this year, according to estimates, and in comparison to growth rates of as much as 7%-10% in countries such as Nigeria, Ghana and Angola.
Globally, mergers and acquisition deals fell by almost 20% in the first nine months of this year, compared with the same period last year, and by more than 24% in the Brics countries (Brazil, Russia, India, China and SA) — the lowest drop since the first quarter of 2009, data provider mergermarket said yesterday.
Africa and the Middle East experienced the slowest third quarter in mergers and acquisitions since 2005 after the value of deals fell by 15.6% to $30.2bn, compared with the same period last year when deals worth $35.8bn were concluded.
“The total for (the third quarter) was, however, the lowest for a third quarter since (the third quarter in 2005,” mergermarket said.
Standard Bank came ninth in the league of top 20 financial advisers based on value after advising on deals worth $3.35bn in the first nine months of this year. It was ranked second for the volume of deals.
Rand Merchant Bank came in at number four for deal volume (nine) but these were worth only $1.5bn, while Investec came 12th, with five deals worth $776m.
Mr Webber said South African companies, which are estimated to be sitting on cash deposits of more than R530bn, were still cautious about investing in the country. “Cross-border deals have also slowed down, although they still constitute the bulk of the deals by value. But a lot of corporations are starting to understand the opportunities in other countries such as Nigeria, which is hot at the moment.”
He cited Tiger Brands, which last week concluded a deal to buy 63% of Dangote Flour Mills in Nigeria for R1.5bn as evidence of interest in Nigeria by South African firms.
He said the deaths of miners and policemen at Lonmin’s Marikana platinum mine had dented SA’s image as an investment destination. “I did a road show in Asia (a week after) the Marikana tragedy and the mood (about) SA and Africa was quite negative — particularly in South Korea and Japan.”