A new report by Global Consultancy Control Risks indicates that Africa’s top economies have continued to maintain investor interest with a strong drive in mergers and acquisition across the majority of sectors.
In their latest report on mergers, acquisition and other deals, Control Risks placed South Africa on top of the list at 51%, Nigeria followed with 20% with 14% given to Kenya as the top most popular target for overseas dealmakers.
These findings captured in the fourth and latest edition of the Deal Drivers Africa report, published by Mergermarket in collaboration with Control Risks, a leading business risk consultancy, were compiled from a number of respondents in private equity (PE), law, and investment banking.
“Being the strongest country in the East African cluster, Kenya, was chosen by 14% of respondents as the third most popular target for overseas dealmakers,” the report said revealing that attractiveness of Kenya and the region is the result of augmented consumer spending and greater trading amongst members of the economic block.
“More attention on East Africa comes as no surprise as consumer growth and increasing trade links between the countries drive forward the bloc’s economy,” it added.
Although foreign players fronted much of the equity investment on the continent, the report shows that local investors drove most of the growth in the Nigerian market.
According to the respondents, most of the foreign buyers of African Companies in 2016 will come from Europe (41%) Asia-Pacific (39%) and North America (16%).
The report noted that energy, mining and utilities are expected to generate the most merger and acquisition activity in the continent accounting for 79% followed closely by industrial and chemical at 72%.
China slowdown is not affecting the economy in Africa
On the contrary, the slowdown in economic growth of China is increasing the investor enthusiasm for deals in Africa and is expected to grow further with increased focus shift from the Asian economy to the regional countries.
“Total African deal volume was buoyant at 290 deals, up one percent from 2014, despite severe headwinds from a slowdown in the Chinese economy and currency woes in South Africa and Nigeria, the continent’s two largest M&A markets.”
Additionally, the 4% growth projection for the Sub-Saharan Africa this year which is above the average rates of other regions in the world is also increasing Africa’s attractiveness.
However, the study indicated that regulatory uncertainty, particularly compliance and integrity issues, was the major obstacle to consolidations in Africa as well as operational and security risks, not forgetting the increasingly cyber risks.
“M&A activity in Africa is currently driven by many factors: Downturns in more established markets make international buyers look out for new targets; capital is more easily available and high-quality targets are offered at very attractive prices,” George Nicholls, Senior Managing Director for Southern Africa at Control Risks, commented on the findings.
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