Mergers and acquisitions … partnership to approach Africa

The privatization of government entities is a fairly well-established practice in Africa; in Kenya several cases of companies previously managed by the government – tourist accommodations, the national telephone company, the companies dedicated to energy production – have been opened up to the private sector. We will try to provide an overview on M&A trend (mergers and acquisitions between companies) and of the concerning opportunities already mostly unexplored by Italian companies but well known by European countries.

In its analysis concluded in 2021, Boston Consulting (“BCG”) identified 5 trends about M&A in Africa:

1) African-led acquisitions on the continent are rising;

2) Private Equity (PE) investors focused on Africa are constantly emerging;

3) Tech Start-ups are attracting more investors;

4) African integration is building “regional platforms” that are consistent and effective;

5) State-owned Enterprises are opening to private capital.

BCG predicts that, despite the slowdown in GDP due to Covid-19, there will be an increasing number of opportunities for the so-called “dealmakers” on the continent. For example, pan-African platforms gain value when profits decline and the economy is weak, amplifying the potential benefit of building and protecting such platforms to mitigate country risk and find synergistic opportunities. In addition, while in the past the main players in the continent’s economy were foreign multinationals investing in Africa, today the commitment of large African groups is constantly increasing, also through the creation of private-equity funds.

Currently the most attractive sector for M&A is i-tech and start-ups, preferably linked to technology.

Several large deals have been concluded in the last few years: in Kenya the sale of Bujagali Energy Ltd’s to Jubilee Holdings, quoted $39 million, or the acquisition of Mayfair Bank by the International Bank of Egypt for $35 million. From Nigeria, on the other hand, originates the acquisition of the Venice Freight Village for the sum of $21 million: a subsidiary of Orlean Invest Holding acquired the Venetian logistics hub, concluding the Nigeria’s largest cross-border agreement in the first half of the 2020s, demonstrating that African-based groups can invest across the continent. In addition to the above-mentioned deals, around 90 small acquisitions have been concluded in Sub-Saharan Africa for a value of approx. $1 billion.

The African Development Bank is aware that M&A represents a huge opportunity for the economy of the continent, as demonstrated by its commitment in organizing forums and platforms dedicated to networking among potential partners: the volume of business opportunities created on these network meetings amounts to € 10 million.

Certainly, compared with other regions of the world, the African M&A market is still very small and there are clear regional disparities, given that the market is essentially dominated by deals in Northern and Southern Africa. Nevertheless, Italian investment funds or private investors should focus more and more on small M&A opportunities, also because of the resilience shown so far by the local economy, mainly sustained by growth in the energy, mining and utilities sectors, as well as the agro-food and food industry in general.

Rita Ricciardi

Edited in AfricaeaffariL’ALGERIA CHE GUARDA AVANTI