Positive outlook for M&A activity in 2009 in South Africa
Thématique :
sud afrique
South Africa is expected to fare better than most countries when it comes to mergers and acquisitions (M&A) in 2009 with the region being well shielded from the turbulent global economy, according to mergermarket's South African M&A Round-up for 2008.
The international M&A intelligence service says that South Africa's "cash flush companies will be cushioned from strife-ridden global markets" allowing them to strive for deals and targeted investments, some of it perhaps off-shore.
Dave Thayser, Director of Ernst & Young Transaction and Advisory Services, tentatively agrees with mergermarket's positive outlook. "There is no doubt that cash-rich companies are in a good position to benefit from opportunities to buy companies cheaply, but I am not sure how many companies are in that fortunate position."
"The implication for those companies that are cash flush is that they have not got caught up in the M&A rush over the last five years by making inappropriate acquisitions and overpaying for them. It is the companies that have kept their powder dry and have cash to spend that stand to gain from the current downturn," he adds.
The mergermarket report cites South Africa's telecommunications sector as an industry to watch closely in 2009, as it will most likely show the most activity. "Vodafone's acquisition of an additional 15% stake in Vodacom (bringing its total holding to 65%) has opened up the industry to increased competition and an expected tussle to acquire available voice and data targets across sub-Saharan Africa," states the report.
However resources and mining are expected to face tough times in 2009 as are consumer-related industries whose customer's pockets have been feeling the pinch of interest rates.
"Consumer-related industries are definitely going to be hit, with buyers waiting for signs of an upturn before coming back into the market," says Thayser. "Timing will be everything in the short to medium term, as buyers attempt to correctly identify the bottom point of the downturn."
According to the report, local M&A activity remained strong in 2008. While global activity dropped by 20%, South Africa closed 156 deals totalling US$14.4 billion, a 1.7 % drop in volume when compared to 2007.
The biggest deal of the year was the spin-off of Remgro Limited's 9.6% stake in British American Tobacco, valued at US$6.95 billion.
The international M&A intelligence service says that South Africa's "cash flush companies will be cushioned from strife-ridden global markets" allowing them to strive for deals and targeted investments, some of it perhaps off-shore.
Dave Thayser, Director of Ernst & Young Transaction and Advisory Services, tentatively agrees with mergermarket's positive outlook. "There is no doubt that cash-rich companies are in a good position to benefit from opportunities to buy companies cheaply, but I am not sure how many companies are in that fortunate position."
"The implication for those companies that are cash flush is that they have not got caught up in the M&A rush over the last five years by making inappropriate acquisitions and overpaying for them. It is the companies that have kept their powder dry and have cash to spend that stand to gain from the current downturn," he adds.
The mergermarket report cites South Africa's telecommunications sector as an industry to watch closely in 2009, as it will most likely show the most activity. "Vodafone's acquisition of an additional 15% stake in Vodacom (bringing its total holding to 65%) has opened up the industry to increased competition and an expected tussle to acquire available voice and data targets across sub-Saharan Africa," states the report.
However resources and mining are expected to face tough times in 2009 as are consumer-related industries whose customer's pockets have been feeling the pinch of interest rates.
"Consumer-related industries are definitely going to be hit, with buyers waiting for signs of an upturn before coming back into the market," says Thayser. "Timing will be everything in the short to medium term, as buyers attempt to correctly identify the bottom point of the downturn."
According to the report, local M&A activity remained strong in 2008. While global activity dropped by 20%, South Africa closed 156 deals totalling US$14.4 billion, a 1.7 % drop in volume when compared to 2007.
The biggest deal of the year was the spin-off of Remgro Limited's 9.6% stake in British American Tobacco, valued at US$6.95 billion.
