2022 M&A Review: Unpacking the deals

The M&A landscape in South Africa has been abuzz with activity in 2022, with deals spanning various sectors such as retail, logistics, mining, and financial services. The recent MTN-Telkom deal has garnered attention, sparking discussions on the driving forces behind these mergers and acquisitions and the value they aim to create for shareholders. Andrew Bolman, CEO of Deal Leaders International, and Mike van Rensburg, Partner and Head of Corporate/M&A at Baker McKenzie, discussed the trends and implications of this surge in M&A activity. Bolman highlighted the current buoyant atmosphere in the market, attributing it to an increase in interest in Africa as a growth destination, particularly amidst challenges in other regions like Eastern Europe due to the Ukraine-Russia conflict. Multinationals are eyeing Africa as an exciting growth opportunity, fueling M&A activity at both multinational and mid-market levels. The favorable operating environment in Africa, coupled with logistical challenges and growth prospects, makes the region attractive for investors. South African companies have been actively engaging in M&A deals with local acquisitions and strategic consolidations. The trend of companies diversifying, consolidating, and entering new markets signifies a shift towards optimizing capital returns and managing concentration risks. Bolman noted the importance of discerning between growth and employment impact in these transactions. He mentioned how companies like Mr. Price are diversifying to mitigate concentration risks and tap into different market segments. On the other hand, Van Rensburg emphasized the value proposition for multinational investors eyeing South Africa. The weak Rand, attractive asset valuations, and strategic imperatives are key drivers for international interest in the region. He highlighted industries like healthcare, technology, and commodities as focus areas for investors. The Africa Free Trade Continental Area Deal has facilitated cross-border transactions and encouraged investment in key sectors. Van Rensburg noted a strategic shift towards outbound activity by South African companies diversifying risks and exploring growth opportunities in other African countries. The trend towards outbound investments indicates a broader strategy of risk diversification and market expansion. While some South African companies have faced challenges in expanding into other African markets, partnerships with local companies are seen as a strategic approach to navigate complexities and ensure sustainable growth. The discussion also touched upon the pricing dynamics in M&A deals, with South African companies pushing back against undervalued offers to protect shareholder interests. Both Bolman and Van Rensburg underscored the importance of strategic valuation and the consideration of long-term growth potential in M&A transactions. They acknowledged the challenges and complexities of doing business in Africa and the need for a patient and deliberate approach to penetrate diverse markets. As the M&A landscape evolves, South Africa continues to attract interest from international investors seeking strategic growth opportunities. The surge in M&A activity in 2022 signals a robust market environment with prospects for further expansion and consolidation across sectors.