M&A in African mid-market expected to reach 125 deals in 2018

28 March 2018 Consultancy.africa 2 min. read
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Afsar Ebrahim, a Partner in the Corporate Finance arm of global accounting and consulting firm BDO, reflects on the state of the African mergers & acquisitions (M&A) market for the mid-market segment.

The fourth quarter of 2017 saw a total of 39 mid-market deals completed in Africa with a total value of $2,986 million. This represents an increase of 5% compared to the corresponding quarter last year in terms of volume and a 3% increase in terms of value. There were three private equity buy-outs in Q4 2017, with a total value of $203 million. Compared to Q3 2017, M&A activity has significantly increased with a 70% increase in volume and an 89% increase in value.

Key deals and sectors

The most active sectors in Q4 2017 were Energy, Mining & Utilities, Consumer and Industrials & Chemicals, compared to Q3 2017 where the majority of deals occurred in Energy, Mining & Utilities and Financial Services. The number of deals in Energy, Mining & Utilities increased from six in Q3 2017 to 15 in Q4 2017.

M&A in mid-market segment of Africa

Two of the quarter’s top three deals were in the Energy, Mining & Utilities sector. The biggest deal, however, was in the Consumer sector, where National Tobacco Enterprise, a company owned by the Ethiopian government, sold its remaining 30.95% stake after disposing of 40% of its shares earlier in 2017. The bidder was the leading Japanese tobacco company, Japan Tobacco (JTI). The deal value was $434 million and JIT now holds 70% of the company’s shares.

The second largest transaction took place in South Africa, namely the acquisition of a 29.6% stake by the main copper supplier in China, Baiyin Nonferrous Group, in Gold One Group. The selling company was the China Africa Development Fund and the deal was estimated at $331 million.

Another major transaction in the Energy, Mining & Utilities sector was the acquisition of the Moab Khotsong and Great Noligwa mining operations from AngloGold Ashanti, a global gold mining company with 21 operations on four continents. The bidder company was Harmony Gold Mining Company, a South African gold mining and exploration company. The company is listed on the Johannesburg Stock Exchange (JSE) with a secondary listing on the NYSE. The value of the deal was around $300 million.

Looking into 2018, BDO forecasts 125 deals in the midmarket. The predominant sectors are likely to be Energy, Mining & Utilities, with 29 deals, representing 23% of the total deals expected in 2018, and Industrial & Chemicals with 27 deals, representing 21% of the forecasted deal volume.