Bringing clarity to Africa’s corporate transaction landscape

Dec 08, 2016

In spite of the current challenges facing the M&A landscape in Africa, there are pockets of opportunity as businesses review their strategies in response to changing global realities.

The inability to confidently interpret information in Africa is fuelling uncertainty in the continent’s corporate transaction landscape. While this has lent an element of uncertainty to businesses considering African acquisitions, for those able to read the signs, Africa’s fundamentals remain positive and opportunity abounds.  

Today, businesses operating in Africa are looking for guidance on how to navigate what many see as an increasingly uncertain landscape.

It is normal for businesses to review their strategies in response to changing global realities.  “What is different about the current cycle is a shortage of reliable insight on which to build predictability and, ultimately, effective corporate strategy,” says Frad Shoko, Head, Global Advisory, Standard Bank. 

In this environment, it is not the frequency, value and drivers of corporate transactions that keep businesses up at night. Instead, banks are increasingly being asked, ‘‘what should we do to develop our business, where are the opportunities and what do the risks mean? As a corporate advisor, this is when the rubber really hits the road,” says Mr Shoko.   

Today, being able to guide and advise on the broader business, competitor and risk landscape provides a competitive advantage.

“At Standard Bank, we believe in Africa. With over 153 years on the continent, across our 20 core markets, our business has developed the expertise to navigate African markets, understand our stakeholders, and guide with appropriate advice – and we have the balance sheets and people on the ground to make this real,” says Mr Shoko.

As such, from a correctly informed perspective, Africa looks distinctly different. Certainly;

  • African governments increasingly demonstrate a willingness to work with investors - often making significant concessions to the right kind of investors with the right attitudes and approach,
  • the continent’s regulatory framework, in many countries, is becoming increasingly pragmatic as governments reap the benefits of global investment in tax revenues, jobs and growth, 
  • barriers to entry in Africa, from a competitor perspective, are fewer,
  • technologies tested and developed elsewhere can be rolled out without development costs in many African markets,
  • new entrants often enjoy first-mover status in many African markets,
  • personnel and other input costs in Africa are often more competitive - especially as local currencies depreciate against the US dollar and other global currencies, 
  • as traditional centres of global corporate investment look less secure (following Brexit) targets in emerging markets, including Africa, look increasingly attractive, 
  • despite much interest in the US dollar, from a transaction perspective, the United States - yet to recover from the financial crisis, remains fragile with currently high and unprecedented levels of economic and political uncertainty,
  • from a South African perspective, exchange control allowances continue to make Africa attractive, with a weaker rand highlighting the significance of US dollar-earning acquisitions on the continent,
  • also in South Africa, if the current rally in the gold price proves long-lived, a host of currently un-bankable gold assets will once again come into play. This has significant implications for M&A activity in the sector as well as for broader growth in the economy and region,
  • despite concerns about the relatively small scale of African corporate transactions, the recent Anheuser-Busch InBev – SABMiller transaction demonstrates the continent’s ability to manage large global deals efficiently – using local intermediaries.

Being on the ground with deep and textured insight into continental realities and opportunity equips Standard Bank to guide clients considering transactions on the continent on, “which deals to choose, which sectors to target, which economies to prioritise and, mostly, where the dangers lie,” explains Mr Shoko.

Having the right partners, insight and relationships provide a more nuanced and informed view of African opportunity. “By bringing this perspective to clients Standard Bank allows businesses to confidently develop effective corporate strategies based on sound advice and the correct interpretation of information,” says Mr Shoko.

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