Deloitte’s Africa outlook for mergers & acquisitions

In a recent interview on CNBC Africa, Mdu Luthuli, Partner: Financial Advisory, M&A Transactions Services at Deloitte, discussed the state of the mergers and acquisitions (M&A) industry in Africa. Luthuli highlighted that South Africa has been the primary driver of M&A activity on the continent, with East Africa, particularly Kenya and Ethiopia, showing positive growth potential. While South Africa remains a mature market, the East African countries are experiencing a surge in M&A activity, indicating a shift towards those regions for investment opportunities. Despite challenges faced by businesses in various industries, M&A continues to be a strategic tool for companies seeking value creation and growth. Large corporations are incorporating M&A into their core strategies to navigate market challenges and respond to changing environments. Luthuli emphasized the importance of having a robust M&A strategy to adapt to market dynamics effectively. He noted that companies using M&A to drive growth or streamline their portfolios must conduct thorough due diligence to ensure the success of their deals. Additionally, he discussed the resilience of the M&A industry, citing a significant increase in M&A deals globally, even amidst the uncertainties brought by the COVID-19 pandemic. Companies are advised to align their M&A strategies with their overall business objectives and market conditions to capitalize on acquisition opportunities. When asked about the trends in M&A, Luthuli highlighted sector-specific consolidation in industries like the fiber space in South Africa. He also mentioned the government-led privatization deals in East Africa, particularly in Ethiopia, showcasing geographic and sector-specific variations in M&A activities. While the M&A landscape continues to evolve, Luthuli pointed out that the length of time taken to finalize deals has increased due to the current uncertain business environment, necessitating thorough evaluation and testing of investment theses. Regarding the outlook for M&A activities in Africa, Luthuli expressed optimism for an uptick in deal activity in the latter part of the year. Deloitte's M&A team covers a wide range of regions across the continent, including South Africa, East Africa, and West Africa, and has observed a recent increase in deal activity. While specific figures for the continent are challenging to quantify, Luthuli indicated a positive trend in deal volumes and values globally and in EMEA, despite a temporary slowdown in recent months. As private M&A transactions are prevalent in Africa, incorporating them into public data poses challenges for accurate quantification of M&A activity on the continent. In conclusion, the M&A landscape in Africa remains dynamic, with varying trends across regions and industries. Companies are advised to adopt a strategic approach to M&A, considering market conditions and business objectives to drive successful deal outcomes. The future of M&A in Africa looks promising, with opportunities for growth and value creation across diverse sectors and geographies.