DURBAN – Refinitiv Deals Intelligence reported a 12 percent decline in mergers and acquisitions (M&A) in the value of announced M&A transactions with any sub-Saharan African involvement in the year 2018.
The report showed that M&A in sub-Saharan Africa reached $31 billion (R428.15bn) during 2018, but was down 12 percent compared to 2017 to a six-year low.
Refinitiv, formerly Thomson Reuters’ Financial and Risk business, is one of the world's largest providers of financial markets data and infrastructure, serving more than 40 000 institutions in more than 190 countries.
The report was published in the Middle East and Africa Investment Banking Review for 2018.
Ron Klipin, a senior analyst at Cratos Capital, said one of the major reasons for decreased M&A in sub-Saharan was likely to have been the uncertainty and perceived risks in emerging markets (EM).
“This can be clearly seen in the major sell-off of EM currencies such as the rand, Angolan kwanza, Mozambican metical, and Zambian kwacha,” Klipin said.
He added that these were punished in a major risk-on scenario of risk-off with a flight to safe havens such as the US dollar and other developed market investments.
“The Federal Reserve policy of a tighter monetary policy and a contraction in global liquidity were also factors impacting on the slowdown in the M&A activities in sub-Saharan Africa,” Klipin said.
The report also shows that inbound M&A declined by 14 percent year-on-year, driven by the lowest number of deals since 2005.
“Domestic and inter-sub-Saharan African M&A totalled $4.7bn, down 39 percent year-on-year and the lowest full-year total since 2002, while outbound M&A declined 26 percent to $6.1bn,” the report showed.
South Africa's overseas acquisitions accounted for 75 percent of Sub-Saharan African outbound M&A activity, while acquisitions by companies head- quartered in the Mauritius and Zimbabwe accounted for 23 percent and 1 percent, respectively.
UPL’s $4.2bn transaction to acquire the entire share capital of Arysta LifeScience was the largest deal in the region in 2018.
The sub-Saharan African investment banking fees reached an estimated $535.1 million during 2018, which was 2 percent less than the value recorded in 2017, while fees from completed M&A transactions totalled $139.8m, a 32 percent increase year-on-year and the highest annual total since 2015, the report showed.