Global events remained turbulent and unpredictable throughout 2016 resulting in a downward effect on M&A activity, however the market remained resolute in Q4 2016, according to Baker McKenzie’s Cross-Border M&A Index.
The Index showed 11 outbound cross-border deals in Africa in the last quarter of 2016, worth US$4.6 billion. There were 22 inbound M&A transactions, worth US$11.4 billion in the same quarter.
Managing Partner at Baker McKenzie’s Johannesburg office, Morne van der Merwe said he remains cautiously optimistic about the state of the M&A market in Africa.
“Political instability and regulatory uncertainty have contributed to the current slowdown in deals in Africa. Global economic uncertainty and geopolitical developments have exacerbated the slow down,” he said.
“The good news is that strategic assets, which are often discounted, matched by “lazy capital” on corporate balance sheets and the strong demand for good private equity deals, will stimulate deal flow in Africa. The investment interest in Africa from China, India and Japan is also expected to lead to an increase in M&A activity in the coming years.”
According to the Index, global buyers announced 1,429 cross-border deals worth US$388.2 billion, a 2% increase in volume and a 1% decrease in value compared to Q3 2016. Despite uncertainty surrounding the results of the US presidential election, the US was the largest acquirer of the quarter representing 31% of total deal value. Baker McKenzie’s Cross-Border M&A Index, which tracks quarterly deal activity using a baseline score of 100, decreased to 249 for Q4 2016, down 1.5% from the prior quarter and down 30% from Q4 2015.
“The year-on-year decline in M&A can be attributed to political and economic volatility coupled with a stricter regulatory environment, which has seen a record number of deals fail,” said Michael DeFranco, global head of M&A at Baker McKenzie. “However, strong sector performances, a rash of megadeals and increasing outbound deals from China and Japan have led to a robust, rather than a roaring, year.”
