South African M&A Breakfast Briefing
Obviously, the main event in South Africa last year was the football World Cup. Although being English I’d rather forget about that and talk about a more recent event – The M&A breakfast briefing that IntraLinks and mergermarket hosted at the end of November. Held in the Michelangelo Hotel in Johannesburg, the event, titled “South African M&A: The Gateway into Africa”, brought together around 130 senior figures from the South African M&A community to listen to a panel of speakers discuss the key issues affecting activity in the region.
Moderating the briefing was the local mergermarket bureau chief Peter Cromberge, he was joined by Craig Forbes from the Corporate Finance Team at RMB, Kevin Cron director of corporate M&A at the law firm Deneys Reitz, Brad Webber joint head of M&A at Standard Bank and Philip Whitchelo the head of M&A strategy here at IntraLinks.
The discussion started with some of the local trends and drivers, with the panel highlighting some notable cross-border deals such as the takeover of Wesizwe Platinum by Jinchaun China’s largest platinum producer, and the Walmart acquisition of Massmart for $4.2bln . What was clear is that the panel felt there were plenty of opportunities for M&A in South Africa. Firstly, the region is perceived by many to be a springboard to the rest of the African continent. Secondly, it was felt that there was room for consolidation in certain sectors with the FMCG space cited as an example and there is also some convergence in IT and Telecommunications industries. The panel suggested that in general South Africa hasn’t been as deeply affected by the global financial crisis as the US or European markets, although the M&A sector dipped for a couple of quarters, volume levels have remained fairly flat.
The briefing mentioned the developed and transparent nature of the M&A market in South Africa, which, according to those on the panel, can boast a mature advisory community. An observation that that has been echoed by the Johannesburg Stock Exchange being rated first out of 139 countries in the World Economic Forum’s Competitiveness report for its regulation of securities exchanges. Additionally, the takeover infrastructure from a legal perspective stands out for its sophistication when compared to the rest of the continent. This, coupled with emerging market growth rates, make the region particularly interesting to foreign acquirers. IntraLinks’ Philip Whitchelo also pointed out that the adoption of technology to enhance the M&A process was on the increase.
However, the panel did highlight a number of unique challenges faced in the region. A strong rand and the perception of the Black Economic Empowerment (BEE) policy by foreign investors were mentioned as challenges. The government is also cognisant of its impact on dealmaking and is seeking advice on international best practice and there is a nationalization debate that continues. Despite this, in reality there is much to be positive about when looking at the South African M&A market.
The briefing ended with a discussion of the wider African growth opportunities. Whilst it was acknowledged that many markets North of South Africa are more complex and less developed, the panel mentioned mining, oil and gas, infrastructure telecoms and FMCG as potential sectors of interest. In terms of opportunities in other African regions, Nigeria, Angola, Uganda and Mozambique were all mentioned as countries that could be attractive in the coming year.