Values of M&A deals rocket threefold

Data for SA indicates a growing trend as the values of new deals climb in spite of negative market sentiment

THE LATEST mergers and acquisition (M&A) data for South Africa indicates a new trend in which higher value deals take place less often but their value has rocketed more than threefold in the first six months of 2019.

Morné van der Merwe, the head of Corporate M&A Practice at Baker McKenzie, said yesterday that this was in spite of negative market sentiment caused by political and economic uncertainty and ongoing reports of state capture.

Last year, according to data compiled by Refinitiv Deals Intelligence, the financial and risk unit of Thomson Reuters, there was a 12 percent decline in M&A in sub-Saharan Africa, with deals totalling $31 billion (R476.78bn) representing a six-year low.

“While the country is seeing a lower volume of M&A deals, analysis by Baker McKenzie shows M&A transactions completed in the first half much higher in value, over the same time last year,” he said.

Market conditions and opportunities in certain sectors could be setting the scene for a trend towards higher value M&A transactions going forward, he added.

South Africa’s total M&A deal values increased 347 percent in the first half of 2019 to $16.6bn, from $3.7bn in the first half of 2018.

The rise was due to three deals, with a combined value of $15bn.

Deal volume, however, fell by a quarter – in 2018 there were 182 M&A deals recorded, compared to 136 in the first six months of 2019.

The first big deal was the $5bn spin-off of pay-TV group MultiChoice to its shareholders by Naspers. The second was Naspers’ acquisition of Russian company Kekh eKommerts OOO for $1.2bn.

Total SA’s acquisition of Anadarko Petro-African Assets for $8.8bn was the third largest transaction.

“Domestic deal-makers appear to have had a stronger risk appetite for high-value transactions in uncertain environments both in South Africa and further afield in Africa,” said Van der Merwe. “Key growth sectors were telecommunications and technology, energy, and consumer goods and services,” he said.

Meanwhile, in the first three months of this year, data from Refinitiv showed South African overseas acquisitions accounted for 57 percent of outbound M&A activity in sub-Saharan Africa, while acquisitions by companies based in Mauritius accounted for 43 percent.

The data, according to Refintiv’s website, showed that M&A globally struggled in the first half, but thrived in the US, where the 60 percent market share was the highest this century.