Mergers and acquisitions 2021: Uncertainties remain, bu…

(Photo: Adobe Stock)

The coronavirus crisis brought economic activity to an abrupt halt in many sectors and regions over the past year – and it is expected to remain so in 2021 – but mergers and acquisitions weren’t dead in the water, particularly in sub-Saharan Africa.

M&A in sub-Saharan Africa totaled $ 25.7 billion in 2020, according to Refinitiv’s investment banking analysis for the region. Refinitiv is a global provider of financial market data and infrastructure.

The value of announced M&A deals was 62% lower than last year when Naspers took merger activity to an all-time high by spinning off Prosus’ $ 35.9 billion Internet assets.

The value of transactions recorded in 2020 was the lowest since 2012, according to the report, with the number of transactions dropping 5% year over year to a seven-year low.

In addition, the value of transactions with a sub-Saharan African destination fell 39% to a 16-year low of $ 12.5 billion as domestic mergers and acquisitions in the region declined 44% from 2020 and the combined value of inbound transactions only reached $ 7.1. Billions, the lowest annual amount since 2009.

In 2020, Sasol, one of the largest plastics, chemicals and refineries in the world, agreed to sell a $ 2 billion stake in LyondellBasell, the largest business in the region in 2020, in October. 50 joint venture includes an ethane cracker, low and linear density polyethylene plants and associated infrastructure near Lake Charles, Louisiana, and will manufacture the products on behalf of the two shareholders subject to toll.

Due to this agreement, materials were the most active sector for doing business in 2020. They accounted for 23% of the target M&A activity in sub-Saharan Africa, followed by energy and energy (19%) and technology (17%) refinitive.

Refinitiv itself was part of the global deal-making drive in 2020 when the London Stock Exchange Group announced the acquisition of the data and analytics company for $ 27 billion. In a media statement, the UK-based exchange said the acquisition of the former Thomson Reuters company “has received 16 merger control approvals to date and has made good progress on pending jurisdictions”.

South Africa, closer to home, was the nation most targeted for corporate action, followed by Uganda. The continent’s outbound activity hit a three-year high of $ 6 billion in 2020, up 13% in value from 2019.

Growth forecasts have been revised downwards and foreign direct investment flows are expected to decline by up to 40%. While we haven’t seen a massive exodus of investments, the Covid-19 crisis has caused many investors to postpone new investments or look for safer havens.

The value was added by the acquisition of PT Ventures from Africatel Holdings by Angola’s state-owned company Angang for $ 1 billion and Templar Investments’ offer of $ 1 billion for the Oman unit of Jindal Steel.

In addition, sub-Saharan Africa and equity-related issuance reached $ 2.5 billion in 2020, 54% more than a year earlier but less than any other annual total since 2005. The number of transactions recorded increased 19% from 2019 IPO was recorded in 2020, compared to three in 2019. Malawian telecommunications company Airtel Malawi raised $ 28.7 million on the Malawian Stock Exchange in February.

The African Development Bank raised US $ 3 billion in a Fight Covid-19 social bond in late March to help mitigate the economic and social impact of the pandemic in the region. With that deal and Ghana’s $ 3 billion Eurobond in February, sub-Saharan Africa debt issuance amounted to $ 8.9 billion in the first quarter of 2020, the second highest level ever.

Only $ 1.9 billion was raised in the second quarter, followed by $ 4 billion in the third quarter. Prosus raised $ 2.2 billion in December, bringing fourth-quarter bond issuance in the region to $ 4.3 billion. Total 2020 revenue was $ 19 billion, 30% less than last year and a four-year low.

According to the annual global M&A report by global law firm Herbert Smith Freehills, “M&A in 2021: Resilient, Agile and Dumb,” activity in the public markets will pick up again in the coming year as bidders seek to move from benefit from lower ratings ;; and the distressed businesses we could expect this year when government support is necessarily running out and the real impact is being felt in the worst-hit sectors.

Gavin Davies, Head of Global M&A, says: “In 2021, from 2020 onwards, there will still be a lot of uncertainties. The major regional and global issues of the past year have not gone away, although some have taken different forms as the situation progressed: the impact of the US presidential election, China’s role and relationships around the world, for what Brexit actually means Britain and Europe.

“There are reasons for optimism, however. There was a strategic realization that 2020 has sparked profound changes in the way the world lives, works and plays, not least the importance of technology in our entire lives. And the realization that M&A can be an instrument of choice for the best to quickly transform companies to counter this shift.

“In the more preferred sectors, we see strong liquidity in the banking market to support strategic corporate mergers and acquisitions and expect this to continue through 2021.”

Growth forecasts have been revised downwards and foreign direct investment flows are expected to decline by up to 40%. While we haven’t seen a massive exodus of investments, the Covid-19 crisis has caused many investors to postpone new investments or look for safer havens.

“Many African countries, international banks and investors have publicly announced plans to move away from fossil fuels and give priority to renewable energies and other ‘green’ projects. This is very much reflected in the sales and investment policies of our customers in Africa, ”explains the company.

“Africa is one of the world’s growth markets for smaller start-ups that are able to quickly fill a gap in the market. This trend has continued to grow, and its impact over the past 12 months has been even more important as various countries across Africa have been hit by Covid restrictions, which in turn have changed the way individuals and companies can work. Herbert Smith Freehills’ report revealed.

According to McKinsey, Africa is home to more than 400 faster growing companies with sales exceeding $ 1 billion, spanning not only the raw materials sector, but also financial services, food and agricultural processing, manufacturing, telecommunications and retail.

However, some international corporations find that the lack of transparency and the increased risk of corruption in some African countries and in some sectors are too complicated given the increasing concentration of investors and are trying to dispose of some or all of African assets or freeze investments in certain Countries. DM / BM

Comments are closed.