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WHY SOUTH AFRICA, NIGERIA AND KENYA ARE SEEN AS THE MOST ATTRACTIVE TARGET COUNTRIES FOR MERGERS AND ACQUISITIONS (M&A) ACTIVITY ON THE CONTINENT

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After several years of steadily increasing M&A activity, African deal
making has made the final step to firmly entrench itself into the global
marketplace. Despite political turmoil in many countries, a prolonged downturn
in the commodities cycle and related currency risk, Africa’s top economies have
maintained investor interest with strong momentum in M&A across the
majority of sectors. This is one of the key findings of the fourth edition of
“Deal Drivers Africa”, published by Merger market in collaboration with Control
Risks, the leading business risk consultancy.

Key findings:

  • South Africa, Nigeria and Kenya are seen as the most attractive target
    countries for M & A activity on the continent

  • 100% of respondents believe that cross-border deal making between African
    countries will continue to increase

  • Respondents expect most foreign buyers of African companies in 2016 to come
    from Europe (41%), Asia-Pacific (39%) and North America (16%)

  • Energy, mining and utilities are expected to generate the most M&A
    activity in Africa (79%), with industrial & chemicals being viewed as the
    second busiest sector in the next 12 months (72%)

  • Regulatory uncertainty, particularly compliance and integrity issues, are
    highlighted as the principal obstacle to M&A activity in Africa (86%),
    followed by operational and security risks (77%)

  • Cyber security is given highest importance by 60% of respondents when doing
    an M&A deal in Africa

George Nicholls, Senior Managing Director for Southern Africa at Control
Risks, comments on the findings:
“M&A activity in Africa is currently driven by many factors: Downturns
in more established markets make international buyers look out for new targets;
capital is more easily available and high-quality targets are offered at very
attractive prices. Despite all the enthusiasm over this positive development,
major obstacles remain. Regulatory, operational, security and increasingly
cyber risks are major risks that should be considered when undertaking M&A
activity on the continent.
“While most actors (88%) acknowledge the fact that external advisers are
crucial to the success of a deal, still only 19% use external support for due
diligence assessments. Hence, many deals fail at the step of the very initial
due diligence, as lack of transparency and local knowledge leads to lack of
clarity in the ownership structures.
“Only 9% reach out for help on anti-bribery and corruption programmes.  Ignoring or underestimating these issues can
not only lead to failure of a deal, but almost more importantly to serious
reputational damage for the buyer.”

 
To download the full report, please click here

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