Nigeria, S’Africa, Kenya top Africa’s 290 merger deals in 2015

THE unfriendly business environment in 2015 notwithstanding, Africa still got its highest number of mergers and acquisitions in the outgone year, nicking 290 deals in the process.

The figure eclipsed all that had been recorded between 2007 and 2014.Interestingly, Nigeria, South Africa and Kenya clinched the lion’s share of the investments.

But while foreign players spearheaded much of the equity investments on the continent, local investors drove most of the growth in the Nigerian market.

The above formed the fulcrum of findings encapsulated in the fourth and latest edition of the Deal Drivers Africa report, published by Mergermarket in collaboration with Control Risks, a leading business risk consultancy.

It further said that respondents expect most foreign buyers of African companies this year to come from Europe (41 per cent), Asia-Pacific (39 per cent) and North America (16 per cent), adding that energy, mining and utilities are expected to generate the most activity in Africa (79 per cent), followed by industrial & chemicals (72 per cent).

However, the study said regulatory uncertainty, particularly compliance and integrity issues, was the major obstacle to consolidations in Africa at 86 per cent, followed by operational and security risks, which stood at 77 per cent.

“Total African deal volume was buoyant at 290 deals, up one per cent from 2014, despite severe headwinds from a slowdown in the Chinese economy and currency woes in South Africa and Nigeria, the continent’s two largest M&A markets.
Accordingly, deal value fell by 26 per cent to $27.3bn in 2015, mostly due to a smaller number of big-ticket transactions on the continent.

On Nigeria, the report said investor’s confidence in the Nigerian merger and acquisition market was strengthened by the conclusion of a presidential election in March, which had been postponed in early February, but this “coincided with a weakening oil price and related currency volatility that resulted in the Naira dropping to more than N200 to the U.S. dollar at official exchange rates.”

“The scope of the opportunity in the country and the limitations a weakening currency has placed on outbound deal-making, contributed to an increase in domestic M&A activity in Nigeria, which for over the past two years has accounted for nearly half of M&A volume.

“Deals such as US-based cereal maker Kellogg’s $450 million acquisition of food distributor Multi-pro Enterprise, and Unilever’s proposed $215 million investment for a 25 per cent stake in Unilever Nigeria, are examples of a deal market that offers opportunities across a variety of industries and demonstrate the strength of Nigeria’s consumer market,” the report stated.