Global Policy Forum

Africa M&A Surges to Record $44 Bln in 2010

Emerging markets are leading the way as mergers and acquisitions bounced back in 2010. Rapid growth in Africa has led to a doubling in corporate mergers over the past two years. With economists predicting torpid growth in developed economies for the foreseeable future, multinational firms have swept into developing markets to take advantage of accelerating growth.

By David Dolan

January 19, 2011

Mergers and acquisitions activity in sub-Saharan Africa surged to a record $44 billion in 2010, double the value of a year earlier, Thomson Reuters data showed on Wednesday.

Investors and analysts expect the pace of deals can only increase in 2011, as more overseas corporates and banks target the continent's rapidly expanding economies, growing middle classes and rising trade flows with Asia.

While deal activity spiked across the region, total fees reaped by investment banks declined by 15 percent, as stiff competition put pressure on margins.

"Africa is becoming much more important for a lot of the global banks. As a consequence, you are seeing increased competition," said Johann Scholtz, banking analyst at Afrifocus Securities in Cape Town.

JP Morgan Chase & Co edged past rival Morgan Stanley to take the top spot for overall investment banking fees, raking in $21.4 million in the region, thanks to participation in Wal-Mart's bid for South Africa's Massmart, as well big equity and debt issuances.

Now home to about 1 billion people, Africa is expected to see its population double by 2050. Some of its frontier economies boast growth rates of 7 percent or more.

Africa will only draw more interest from companies in developed economies, many of which are struggling with slow growth prospects, said Adrian Saville, chief investment officer at South Africa's Cannon Asset Managers.

"In sub-Saharan Africa you've got much faster economic growth, and not just faster economic growth, but growth that look sustainable."

In the immediate future most deals will likely continue to focus on industries that target growing consumer spending, such as telecoms and financial services, Saville said.


Globally, announced M&A deals totalled $2.2 trillion for the year, the data showed, rising for the first year since 2007. Emerging markets deals hit a record $378 billion.

The chief executives of both Citigroup Inc and JP Morgan have recently visited the continent to stress their interest in winning Africa deals.

M&A fees, historically the biggest contributor to total investment banking activity, accounted for just under 50 percent of all fees, the lowest since 2007 and evidence big banks are doing a wider range of deals.

Equity market deals -- such as initial public offerings and share offerings -- accounted for a third of total fees.

Some of the biggest deals in 2010 involved corporates outside of Africa looking to acquire a foothold in the continent.

The biggest M&A deal was Indian telecom Bharti Airtel's $10.7 billion acquisition of the African assets of Kuwait's Zain.

Likewise, Japan's Nippon Telegraph and Telephone paid around $3 billion for South African IT firm Dimension Data, as the fixed-line operator looks for opportunities beyond its shrinking domestic market.

South Africa, the continent's largest economy, and India were the most acquisitive nations in 2010.

South Africa was also the most targeted country, as many overseas firms see it as a gateway into the region.

Major equity market deals included miner African Barrick Gold's nearly $900 million London IPO, while the top debt market issuance was a nearly $2 billion South African sovereign.

As well as leading the pack for overall fees, JP Morgan brought home the most from M&A.

Morgan Stanley won the top spot for equity market fees, while Citigroup was the leader in debt markets. France's BNP Paribas took home the top spot for syndicated loan fees.


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