The M&A Dating Game III: This Country with One Coup Too Many  

The third 'The M&A Dating Game' series article about M&A opportunities focuses on an island nation that’s been averaging about 2 coup d’états per year.


12 June 2014

M&A Dating Game - Merger and Acquisition opportunities

This is the third article in a third article in a series about countries that have not had an announced M&A event in the past 20 years. In my opinion, there’s so much that these countries have to offer that it’s a shame that they’re being left out. Therefore, I have decided to take it upon myself to drum up some business for them. Last time I left you with this hint: “we’ll be covering an island nation that’s been averaging just about 2 coup d’états per year since 1975, with the latest occurring in the early 2000s.”   Looks like I’m good at stumping you, so I’ll start off with a few more hints about the country to see if you can narrow it down.

  1. It’s located in Africa;
  2. It has an ongoing territorial dispute with France;
  3. It is the only country to be a member of all of the following organizations: The African Union, Francophonie, Organisation of Islamic Cooperation, Arab League, and the Indian Ocean Commission.

I can imagine this wasn’t particularly helpful, so I’ll just tell you. Today’s country is….

The Comoros

Before I start, I can tell you with certainty that this is going to be a tough sell for a variety of reasons. Being the eternal optimist, I look for a silver lining - let’s get down to it. The Comoros is an archipelago located between continental Africa and Madagascar. It’s in a sort of ‘safe zone’ weather wise due to its tropical climate and general lack of natural disasters. It is considered one of the only true democracies in the region, which is no small feat in itself. This is also pretty much where the good selling points end.

To give you a more accurate representation of the country, I will turn to the CIA World Factbook, along with my notes:

One of the world's poorest countries, Comoros [has]… inadequate transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a subsistence level of economic activity [where 50% of the population lives under $1.25 per day], high unemployment, and a heavy dependence on foreign grants and technical assistance… The government - which is hampered by internal political disputes - lacks a comprehensive strategy to attract foreign investment and is struggling to upgrade education and technical training, privatize commercial and industrial enterprises, improve health services, diversify exports, promote tourism, and reduce the high population growth rate. Political problems [i.e., an unsurprising byproduct of 20 coups in under 30 years!] have inhibited growth.

Not the greatest elevator pitch I’ve ever heard, but fine. Now let’s talk business. The terrible state of the economy means the government wants to play ball with potential investors, which could mean providing favorable terms. I see three different plays here.

  1. Broadcast - The Comoros has a government owned newspaper, radio and television service. Obviously, it’s a small and poor market, but could be a great place for a budding media tycoon to get his start. With some strong financial backing, it could even become a powerhouse – Qatar’s Al Jazeera TV network also started small, but grew quickly to have global reach.
  2. Shipping - The Comoros is situated right in the middle of the Mozambique Channel, which was heavily used before the Suez Canal opened. Although the Suez cut into the Channel’s business (and its proximity to waters patrolled by Somali pirates doesn’t help either), it is still widely used as a shipping lane to the Middle East. One could take advantage of this by starting a shipping services industry in the Comoros – maybe a place for ships to stop for repairs and restocking, exchange cargo and refuel. Some creative marketing would certainly be needed, but taking advantage of some of the geopolitical strife in the countries along the Suez could attract some business to the Comoros.
  3. Tourism - My last idea (and this one took some creativity) is tourism. You may think this is an obvious play given the climate, but hear me out. The Comoros are not easy to get to from pretty much anywhere but Africa. Although it has a small tourism industry that caters to rich Americans and Europeans, it constantly loses out to its regional rivals such as the Seychelles and Mauritius. I propose a pivot –Africa’s middle and upper class is growing at fast clip; it is estimated that the middle class numbers over 350 million in Africa, more than the entire population of the United States. A lot of international business is being attracted there because of that – SABMiller, a brewery, for example, is investing hundreds of millions of dollars in Nigeria. This makes me think that there’s also an opportunity to begin investing in leisure activities to take advantage of the additional disposable income available to Africa’s people. With over 16 countries to choose from where over a third of the population is in the middle class, this might actually be a home run.

  "A New Class of Consumers Grows in Africa" - WSJ: http://online.wsj.com/news/articles/SB10001424052748703703304576296663397991894 Source: WSJ

 

Now, for the next edition’s hint.

For the next installment of ‘The M&A Dating Game,’ we’ll be covering a nation that housed Napoleon during his exile the last six years of his life (and as an added hint, Elba is not its own country…).



Ronen Cohen

Ronen Cohen

Ronen is a Senior Associate in Strategy and Product Marketing at Intralinks where he helps shape the direction and marketing of Intralinks Dealspace and DealNexus for the M&A community. Prior to joining Intralinks, Ronen was a management and strategy consultant for several years. Ronen has also worked in the financial sector, specifically in the venture capital and private equity fields. He graduated from New York University’s Stern School of Business with a dual degree in Economics and International Business, with a specialization in Entrepreneurship.