DealMakers - 2019 Annual
by Marylou Greig
2019 marked DealMakers’ 20th anniversary, and a year in which we are again able to celebrate the totality of work undertaken over the decade 2010-2019.
Different from the first decade’s celebrations is that this time we also recognise – with special once-off trophies – the increasing role played by the legal advisers. Congratulations to the worthy winners: JPMorgan, Investec Bank, Webber Wentzel and Cliffe Dekker Hofmeyr. It would, however, be remiss if comment was not made on the skewed effect the value of the 2015 Anheuser-Busch InBev acquisition of SABMiller at R2,57trn has had on the decade’s numbers. If this mega deal, which won Deal of the Year in
2015, is stripped out of the numbers, Rand Merchant Bank tops the list of Financial Advisers by a margin of R302bn and Werksmans, for Legal Advisers, by a margin of R182bn. What this showcases is not only the importance of landing the big ticket deals, but also the decision by DealMakers to include deal activity/flow as an additional performance indicator.
Looking back at which deals took Deal of the Year (page 5), it is interesting to note a very even spread across the industries. A telling tale as to the robustness of the M&A industry in the listed space, against a background of domestic geo-political risk factors, is the number of successful deals executed by the winning advisory firms. The period 2003 to 2007 recorded the highest number, peaking at 95 deals in 2005; from there on, there is a steady slide with the 2019 winner, Nedbank CIB, taking the gold medal with just 24 deals.
In 2000, the value recorded for M&A listed activity, for JSE-listed companies, was R209bn from a total of 534 deals. In 2019, the value of successful M&A deals for South African exchange-listed companies stood at R421bn from a total of 463 deals. At face value, the numbers give no insight into the change undergone by the industry over the last two decades. For a start, the exchange rate was R6/$ and R10/£ in 2000! At this time, theoretical corporate finance and the valuation of companies were still in their infancy and it was difficult to collate information about companies and sectors. The entry of international competitors into the arena saw the development of more innovative and complex solution offerings, with tools combining debt and equity financing emerging, which itself gave way to the need for specialised teams to keep up with the pace at which clients’ businesses evolved, and as companies embraced the 4th Industrial Revolution. The investor landscape has also undergone change; the improvements in the dissemination of information enabled by the internet and digital platforms, as well as the commoditising of research material with deeper insight, has been profound, with exchange-listed requirements obliging companies to inform shareholders on relevant matters.
This past decade has witnessed Corporate SA in crisis, with the corporate failures of Steinhoff, Tongaat Hulett and EOH, and companies borrowing to acquire offshore assets – later to be saddled with unsustainable debt, and forced to sell off family jewels. But so too have we witnessed the vote of confidence in SA under the presidency of Cyril Ramaphosa, with the foreign direct investment which will result from the implementation of deals such as PepsiCo/Pioneer and Milco/Clover, which will contribute meaningfully to growth in the SA economy. What is evident however, is that these large scale M&A transactions take time and patience to conclude.
My grateful thanks to the Oval Table members who make up the DealMakers Advisory Board, for their tireless support over the years (and to the Independent Panel for the unenviable task of choosing the winners of the subjective awards) and for ensuring that DealMakers remains reputable and relevant in this ever-changing M&A space. To the small family of Gleason Publications, each member of which fills a vital role – our journey has been one of highs and lows, we have ridden the waves and have owned them. Here is to the next decade!