Last year was a challenging one for M&A in Africa, with both deal value and volume dropping to their lowest figures on record. Yet 2021 has shown signs of a resurgence, with H1’s total of 87 deals marking a 15% increase compared to H1 2020.
Deal value shot up to US$56.7 billion in the first half of the year, largely thanks to the US$46.1 billion share swap agreement between South African multinational Naspers and its Dutch-listed investment unit Prosus. The deal pushed African deal value to its highest H1 total on record.
Even without the Naspers deal, H1 2021 deal value would stand ahead of 2020’s record low annual total of US$9.7 billion—highlighting a renewed sense of confidence among dealmakers.
South Africa storms ahead
South Africa continued to be the most active country for dealmaking, in terms of both value and volume. A total of 41 deals in South Africa worth US$46.56 billion were announced during the first half of the year—already higher than any annual value total on Mergermarket record (since 2006).
Deal value was pushed up due to the highest-valued deal of the year—Prosus’ acquisition of a 45.4% stake in Naspers—which was the highest-valued deal targeting a South African firm on Mergermarket record.
The deal between Naspers and its Dutch-listed investment unit was structured via a share swap agreement, in a move aimed to reduce the impact of its 29% holding in Chinese internet giant Tencent on local financial markets.
While the Naspers deal stood far above the rest of the pack in terms of value, deal volume also saw an uptick year-on-year, reflecting a strong foundation of activity in the South African deal market. A total of 41 deals were announced during H1 2021—an increase of six deals year on year.
Telecommunications, media, and technology (TMT) was the most active sector for South African dealmaking, with a total of 10 deals recorded—almost overtaking the 11 deals announced throughout the whole of 2020. South African TMT deal activity had been on the rise before COVID-19 hit, reaching a peak of 24 deals in 2019. H1’s activity is a promising sign of the beginning of a potential dealmaking resurgence.
The highest-valued South African TMT deal in H1 was Volaris Group’s US$88 million acquisition of software and IT firm Adapt IT. The Canadian software group was forced to increase its offer following competition from rival suitor Huge Group, a South African telecommunications firm.
Energy, mining & utilities dealmaking bounces back
Energy, mining and utilities (EMU) dealmaking displayed an impressive rebound in the first half of the year. The sector generated the highest number of deals in Africa across all sectors, with a total of 24 announced deals—up by 14 year on year. A total deal value of US$5.8 billion, meanwhile, has already overtaken 2020’s annual figure of US$2.6 billion.
Performance was boosted by some big-ticket domestic tie-ups, including Zambia Consolidated Copper Mine (ZCCM)’s acquisition of a 90% stake in the Mopani copper mines owned by Swiss mining giant Glencore. Global demand for copper is rising, with the metal trading at over US$8,000 per ton, according to reports. Demand is being driven by decarbonization—the boom in electric vehicles (EVs) has boosted the need for copper as the metal is used widely in EV production.
Another EMU deal to make the top five of the year was Eni, Shell and Total E&P’s US$800 million sale of a 45% stake in oil mining lease (OML) 17 to Nigerian investment company Heirs Holding and its affiliate Transnational Corp.
Overseas dealmakers turn to Africa
Inbound interest in African assets dropped to a record low in 2020 as the COVID-19 pandemic put deals on hold across the globe. There are signs that international confidence in African deals is on the rise. A total of 46 cross-border deals took place in H1—an increase of 12% year on year.
While the Prosus/Naspers deal ensured that the Netherlands was on top in terms of deal value, the UK topped the volume table chart, having been involved in seven deals valued at US$1.24 billion during the first half of the year.
The largest of these deals was Cairn Energy Plc and Cheiron Petroleum Corporation’s purchase of Shell’s Egypt-based upstream oil and gas assets, valued at US$646 million.
Dealmaking within the continent was undeniably hit hard by the global pandemic. Many dealmakers who would have previously viewed Africa as a growth opportunity were suddenly forced to grapple with extreme logistical challenges and unprecedented economic uncertainty.
Now dealmaking within the continent is on the rise, with international interest in Africa’s energy and mining assets a promising sign of things to come. Domestic tie-ups are also a sign of growing confidence, as local firms look to take advantage of high-growth assets.