Increase in mergers and acquisitions confirms bullish outlook for 2011

2011-06-23 00:00

ALL the indications were that 2011 would be another year of growth or of increased mergers and acquisitions (M&A) activity on the African continent. South African M&A activity made a strong recovery in 2010, up 133% from 2009, and at the highest levels since 2008.

A MergerMarket report indicated that M&A acquisition activity in South Africa totalled US$15,7 billion (R106 billion) in 2010.

With South Africa being admitted as a BRIC (Brazil, Russia, India and China) nation it is now even better placed for boosting investment within the country as well as the entire African continent.

Rumours of foreign companies looking to Africa as part of their growth strategy have begun to ring true with the recent approval, albeit with conditions, of Walmart’s acquisition a 51% stake in Massmart for about R16 billion.

Tiger Brands recently announced its proposed acquisition of Davita Trading for an estimated R1,345 billion to support its growth strategy. It stated that “Davita has an established distribution footprint on the African continent, which will provide Tiger Brands’ export division with new growth vectors by leveraging off Davita’s solid distributor relationships and penetrating new geographies as well as deepening market penetration in existing markets”.

M&A activity has reached KwaZulu-Natal with KPMG assisting as transaction and legal advisors to Unilever in its proposed disposal of Status, the male deodorant brand.

As part of a ruling by the South African Competition Authority Unilever was required to dispose of Status, which was acquired during December 2010 as part of the global Sara Lee personal care portfolio. Unilever has announced a binding sale agreement for the sale of Status to Tiger Brands for an undisclosed sum.

In a separate deal, Unilever has entered into a binding agreement to acquire Mousson foam bath and lotion brand from Tiger Brands, also for an undisclosed amount, with both transactions still being subject to regulatory approval.

DealMakers’ first quarter results for 2011 indicate a total of 102 deals, compared with 87 in 2009, being completed in South Africa at a value of R102 billion, with local deals comprising R68 billion and deals involving foreign companies representing R34 billion.

These results confirm the bullish outlook for 2011 as they are in total 42% better than the value of deals completed during Q1 2010.

Halfway through the year, it appears that 2011 is another positive year for M&A activity, with the hopes that the latter half are as successful, driving investment within our country and on the African continent.

For more information, call KPMG at 033 347 7600.

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