If the number of operations increased in 2015 in Africa, the unit value, it continues to fall, says a study released in late February. Stephanie Lhomme, Regional Director Europe & Africa at Control Risks London, analyzes developments to wait on the front of the “M & A” African.
The new edition of “Deal Drivers Africa” has just been published.
This annual barometer of mergers and acquisitions taking place in Africa is done by the specialist British financial information Mergermarket in association the English consulting firm Control Risks, the American specialist financial publications Merrill Corporation and the Nigerian FBN Capital investment bank. The 2016 edition, which covers operations last year, was published on 24 February.
According to “Deal Drivers Africa 2016”, 290 mergers and acquisitions were recorded over the twelve months of 2015, up 1% year on year. However, the aggregate value of these transactions reached $ 27.3 billion, down 26%, according to the results of this study, which includes information compiled especially to one hundred 100 investors and financial advisors .
Data from this study are significantly different from those compiled by the United Nations Conference on Trade and Development which recognizes $ 20 billion of cross-border merger and acquisition operations in Africa in 2015, against $ 5.1 billion in 2014.
The numbers of “Deal Drivers Africa 2016” are a little closer to those published last October by the Thomson Reuters group that accounted for $ 23.4 billion of mergers and acquisitions involving operators of the only sub-Saharan African, the period January-September 2015, a decrease of -23% in one year.
The most active African markets
The new “Deal Drivers Africa” however confirms a trend of market funds: if the number of mergers and acquisitions remains fairly stable on the continent, their unit value, it is in decline.
The bulk of transactions compiled in this study were below a maximum ticket of $ 250 million.
Only five operations have passed the $ 500 million last year, against 14 in 2014. South Africa, Kenya and Nigeria remain the most active markets are recovering but others (Egypt & Maurice) or record real Advanced (Ethiopia, Tanzania …).
On the occasion of this publication, Stephanie Lhomme, Regional Director Europe and Africa Control Risks, details the main lessons of the African market of mergers and acquisitions, and analyzes its prospects.
Control Risks has 2 700 employees. The British group is based in Johannesburg (South Africa), Lagos and Port Harcourt (Nigeria) and Nairobi (Kenya).
Interview by Benjamin Polle.
Read the latest “Deal Drivers Africa ,” the trend for two years on the African market of mergers and acquisitions continues: after a decade of strong growth, priority is given to smaller acquisitions. This is it here to stay?
Stephanie Lhomme: The market for mergers and acquisitions is stable in Africa, and in 2015 recorded its highest number of transactions since 2007. It is marked by a strong performance of intra-African operations, which account for 62% of transactions volume but we also see a surge in dollar-denominated transactions that benefited from strong deceleration in local currencies. The dollar transactions rose to $ 19.2 billion against $ 11.2 billion in 2014.
What areas you feel are capable of taking over from the energy, mining and raw materials that shed 3 points in volume and 12 point value according to data gathered by “Deal Drivers”?
In several areas, the trend is the same: too many operators and a necessary consolidation. This applies to the telecommunications, where operators are too many favoring a consolidation logic for the biggest players.
Similarly, in the bank: many institutions lack the capacity to finance large transactions. Added to prudential ratios identified in Kenya and Tanzania that lead to reconciliation.
Finally the African insurance also suffers from a high number of agents. These sectors will generate merger and acquisition.
The focus is on East Africa in the report. Why the potential for acquisitions is more important?
There is a report that investors were active in South Africa and Nigeria to Kenya, Ethiopia and Uganda.Economies and the South African and Nigerian currencies are down, when Kenya has a class of young entrepreneurs very open to the arrival of foreign investors. Kenya also has a more diversified economic base as Nigeria.
“Deal Drivers Africa” due to the fall in oil prices to a low of ten years an opportunity of investments by asset purchases at lower prices. However, the fall in oil, minerals and raw materials does not redistribute the cards?
Although the share of energy, mining and raw materials accounted on average for 20% of transactions between 2007 and 2013, several sectors gradually replace it. The consumer sector has concentrated 13% of transactions value in 2014-2015, marked in particular by the acquisition by British Diageo South African brewer United National Breweries), against 7% on average between 2007 and 2013.
Even finding regarding pharmaceutical, medical and biotechnology, which were only marginal 2% of mergers and acquisitions in six years, and have drilled 20% of transactions in 2014 and 2015. Among the operations in this sector are: the merger of Emirates Al Noor and the south African south Africa’s Mediclinic, redemption by the Canadian Valeant Pharmaceuticals of Egyptian Amoun Pharmaceutical Industries, the sale of a south African unit to Aspen Pharmacare Litha Pharma, a subsidiary of Endo Scottish International.
A final part of the report focuses on the consideration of cybersecurity in acquisitions. What is the subject in mergers and acquisitions in Africa?
It is relatively well understood and can be reduced to a single technological dimension of credit card misuse, for transfers from one bank account hacked … Given the technology boom in Africa, the issue of cybersecurity is all the more crucial.
For example, Control Risks has recently worked on the case of an attack on a Nigerian company a month after the acquisition of the latter; the amounts invested to stop the attack and counteract the weaknesses of control systems have greatly impacted the return on investment that had been taken into account in the valuation of the company.