Posted by: africanpressorganization | 9 May 2012

African M&A remains robust, mergermarket data shows


 

African M&A remains robust, mergermarket data shows

 

LONDON, United-Kingdom, May 9, 2012/African Press Organization (APO)/ — While the pulse of Africa’s M&A deal flow is linked to the heartbeat of global financial markets, African markets are proving resilient in the face of global jitters as they have been largely sheltered from toxic debt exposure. Foreign investors and African companies with strong cash piles will continue to scour the continent for access to developing markets.

 

Following a strong first quarter in 2011 with deal value at USD 10.9bn, deal activity in 2011 saw a downward trend through the rest of the year. Nonetheless, on an annual basis, deal activity has largely picked up since the lows of 2009 with USD 40bn worth of deals in 2010 and USD 26.8bn in 2011.

 

While African M&A activity is certainly not immune from global macro-economic pressures, strong deal drivers suggest that the continent’s M&A landscape will continue to be robust into the future. These drivers include the likes of foreign investment, cross border deals, sector consolidation, increased competition, infrastructure investments and expanding services.

 

Cross-border and inbound foreign investment continue to remain dominant themes as both global and regional investors seek exposure to relatively untapped growth markets. Wallmart’s USD 2.1bn acquisition of a majority stake in South African retailer Massmart is an indication of the allure of exposure to growing African markets.

 

Strong inbound investment into Africa has been accompanied by a sizable wave of infrastructure-related funding deals as Africa seeks to strengthen its infrastructure network to keep pace with its growing economies.

 

Interest from Asian investors remains a significant driver for deal flow in the continent. Mozambican and South African coalfields continue to appeal to Asian investors, including India and China, while minerals such as gold, copper, platinum and iron ore are also alluring to foreign investors. Last year, Chinese resource group Jinchuan launched a USD 1.3bn takeover deal for JSE-listed base metals miner Metorex, which has copper assets in both DRC and Zambia.

 

Consolidation also continues to be a strong catalyst for M&A — for instance, growing business links between East African markets such as Tanzania, Kenya, Uganda and Rwanda has helped bolster cross-border deals between these countries.

 

In terms of sector activity, energy, mining and utilities continues to see the most action with deals stacking up USD 62.3bn worth of investments since 2005. Financial services and telecommunications account for the second and third most deal activity with investments totaling USD 41.4bn and USD 37.9bn respectively.

 

The financial services sector remains a key area for M&A. And as markets seek to improve their bouquet of services, competition increases. Central banks of several governments are beefing up capital requirements to ensure the health and liquidity of their local banks. In Nigeria, banking reforms have spurred a wave of consolidation and cross-border interest, with a number of South African flagging their interest in acquiring Nigerian banking assets.

 

Oil and gas finds and production in countries such as Ghana and Tanzania are prompting a flurry of investment activity in those respective markets. Oil exploration off the coast of several West African nations has added a new sector to a region heavily dependent on natural resources. Oil majors such as Shell are offloading onshore blocks in Nigeria, giving local players an opportunity. Meanwhile other majors such as Chevron and Lukoil are ramping up exploration efforts in the region.

 

 

The continent has also seen its share of mega-deals with Lafarge’s USD 15bn investment into Orascom Cement and Bharti Airtel’s USD 10.7bn acquisition of Zain’s African operations among the top deals by value since 2005.

 

South Africa is generally regarded as the key which has helped open the door of Africa’s growing M&A landscape. Since 2005, South Africa has represented the top target destination for deals with USD 118.3bn worth of deal-flow directed into the country. Meanwhile, South Africa is also the top bidding country with regards to M&A in Africa with USD 72.2bn worth of deals originating from South African bidders.

 

Further north in the continent, M&A activity in North Africa, especially in the Maghreb region, could be on the brink of an upturn as governments of those countries prioritise projects such as affordable housing, healthcare and education. Strategic investors are looking to enter at least one North African market, and then extend their reach across the region.

 

Relative political stability and support from the Gulf Cooperation Council have made Morocco an attractive destination for investors, at least in the short term. Arab spring countries (Egypt, Tunisia and Libya) have seen investors adopting a “wait and see approach” pending more political stability.

 

For more information or press interviews please contact:

 

Flora Wilke

 

Head of PR, EMEA

    

Tel : +44 (0) 207 010 6348

Email: flora.wilke@mergermarket.com

 

About mergermarket

mergermarket, part of The Mergermarket Group, is an unparalleled, independent M&A intelligence tool used by the world’s foremost financial institutions to originate deals. It provides proprietary intelligence on potential deal flow, potential mandates and valuations via the world’s largest group of M&A journalists and analysts who have direct access to the most senior decision-makers and corporates.

Incorporated in December 1999 by founders Caspar Hobbs, Charlie Welsh and Gawn Rowan Hamilton, it has since become the fastest growing business in its sector. As well as expanding its coverage across Europe, Americas, Latin America and the Asia-Pacific region, the company continues to launch ground-breaking products and services.

In August 2006 The Mergermarket Group was acquired by the Financial Times Group, publisher of the Financial Times newspaper and FT.com. FT Group is a division of Pearson plc, the international media group. For further information, please see: http://www.mergermarket.com

 

SOURCE 

The Mergermarket Group


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