DealMakers - Q1 2020
Dealmaking in a tense global environment
Innovation is key to keeping deals in the pipeline
by Willem Jacobs and Gasant Orrie
While macroeconomic factors such as continued political turbulence and widespread fiscal uncertainty have undeniably impacted dealmaking across the globe, deal flow has by no means come to a halt.
Rather, the challenging commercial environment has served as a catalyst for innovation, resulting in an evolution of dealmaking that requires greater agility and flexibility than ever before.
Cliffe Dekker Hofmeyr has led the local market in terms of merger and acquisition (M&A) deal flow for over a decade. The firm’s accolades at the recent DealMakers Awards, which include being named the first-ever M&A Legal DealMakers of the Decade 2010 – 2019 for Dealflow, and ranking first in both the General Corporate Finance Deal Flow and BEE Deal Flow categories, are a testament to the significance of an innovative approach.
There has been a significant decrease in the number of large M&A deals in the pipeline, but we are still seeing a healthy number of small to medium-sized deals as a result of corporate restructurings, refinancing and BEE-focused transactions. These deals generally require a higher level of efficiency, more flexibility in terms of payment terms, and a value-oriented approach.
One factor that has contributed significantly to this shift in the corporate and commercial legal landscape has been the stagnation of public markets. Public listings have gradually slowed as the model of public ownership is increasingly falling out of favour, at least for many companies in the middle-market space, as well as those in the growth-orientated stages of their maturity curves.
Coupled with this, there have been a number of changes and more complex, costly requirements for firms to list.
While listings may have slowed down, South Africa’s legal sector continues to have a stable base of companies seeking compliance and advisory services in the face of new legislation and an ever-changing regulatory framework.
Key legislator differentiators to other markets include South Africa’s complex labour law environment, the country’s Constitutional Court, as well as its Broad-Based Black Economic Empowerment (B-BBEE) legislation and ever-changing Competition Amendment Act. While this constant introduction of new legislation and an increasing regulatory and compliance load can be a challenge for practitioners, it also drives companies to seek legal advice.
From a disruptive perspective, technology continues to have an impact on legal services, especially in the face of tough economic times. Increasingly, we’re seeing the development of innovative legal technologies to leverage services and create efficiencies that offer increased flexibility at relatively low costs to potential clients.
As a large law firm, we are also adapting in terms of the sectors that we cater to – for example we now operate a fintech practice area and have experts in data protection and cyber crime.
We believe that it is this adaptive approach that has allowed the firm to offer a balanced combination of excellence in practice and value for money. It allows us to do not only large deals, but also value deals.
Jacobs is a Director and National Head, and Orrie, Cape Town Managing Partner and Director - Corporate and Commercial practice at Cliffe Dekker Hofmeyr.