DealMakers - 2022 Annual (released February 2023)
by Marylou Greig
Facts are facts, and while they can be dressed up or down, they reflect the naked truth – dealmaking in South Africa is in steady decline.
All but for a slight correction in 2021, due to the release of deals delayed by pandemic lockdowns, the effect of the political and energy related woes faced by ‘SA Inc’ on investor confidence is clearly seen in the number of local M&A deals captured for 2022 – down 7% on the numbers recorded in 2020 and that at the height of the COVID-19 pandemic! The start of 2023 offers insight as to what is to be expected – only four deals were announced during January, this compared with the 26 announced in January the previous year. The number of transactions by foreign companies with secondary listings on SA’s exchanges was constant, curtailed to a degree by global uncertainty.
The take private of Mediclinic International, shortlisted for the Brunswick DealMakers Deal of the Year 2022, was the largest deal by value for 2022 at £2,05bn (R41,8bn). Gold Fields’ unsuccessful acquisition of Canadian Yamana Gold would have taken top spot at R103bn. The fact that, of the top 10 deals by value for 2022, only three were by SA companies, speaks to the decline in dealmaking in the listed space.
Behind the scenes – in what DealMakers categorises as general corporate finance activity, companies focused on value creation for shareholders by undertaking share repurchase programmes (R265,9bn versus R115,3bn in 2021) and the distribution of special dividends and unbundlings (R464,2bn versus R63bn in 2021) – most notable being the unbundling by Rand Merchant Investment of its stakes in Momentum, Metropolitan and Discovery, and PSG Group’s distribution of its stakes in its listed portfolio (also shortlisted for Deal of the Year 2022). For the most part, the uptick in the number of listings recorded reflects the growing number (19) of secondary listings undertaken by JSE-listed companies on A2X. But part of the picture is also the increased opportunities now available for domestic investors in the form of new disrupters and innovators.
Private equity continues to be an important driver in the dealmaking space across the continent. In South Africa, two sizeable transactions were recorded: Digital Realty’s acquisition of a majority interest in Teraco Data Environments (R56bn), and the exit by Actis and Mainstream from Lekela Power (R25bn) – the 2022 winner of the DealMakers Private Equity Award.
Given that more that 50% of adults in sub-Saharan Africa remain unbanked, the scope for investment in the fintech space is compelling, and as this number decreases, so the number of opportunities will grow.
Also on the radar of institutional investors are the venture capital alternative investment asset class – although the tough macroeconomic environment and associated rising interest rates will likely curb fundraising outcomes.
DealMakers is in the fortunate position of having the support, not only of the Oval Table member firms, but also of the broader industry, which has allowed us the confidence to introduce a number of new initiatives. In October, the DealMakers Pathfinders Networking event was successfully launched, with the aim of creating an environment in which young professionals in the financial,
regulatory, legal and audit space could come together, interact, make new connections, and gain valuable exposure to individuals within the industry. In our quest to provide a fuller picture of dealmaking on the African continent, DealMakers AFRICA will launch its own Oval Table advisory board. The intention here is to establish a body which will add value not just to the participating firms, but also to the industry as a whole.