Challenging conditions – both of a global nature and those of SA’s own making – have severely curtailed the number of mergers and acquisitions recorded by DealMakers for the first three months of this year. However, though there is still much uncertainty (with rising interest rates and the risk of a total grid collapse a very real possibility), M&A activity has gained some momentum since the quarter close, where companies carrying strong balance sheets and having the ability to move quickly have taken advantage of opportunities and distressed situations.

Deal activity by corporates listed on one of the local exchanges declined 61% on levels reported in Q1 2022, with the aggregate value of deals at R31,72bn from 59 deals (2022: 94 deals valued at R81,82bn). The largest deal by value for the quarter, and the only BEE deal for the period, was Absa’s disposal of a 7% stake valued at R11,6bn.

The most active sectors were Real Estate (30% of the quarter’s deals) followed by the tech and energy sectors. Deal size fell typically in the R50m to R200m bracket reflecting c.30% of deals recorded for the period. SA-domiciled companies were involved in 18 cross border transactions, notably in Australia (5) and Europe (5), followed by Africa (4).

Share issues and repurchases characterised the general corporate finance activity for the quarter, with R212,59bn raised from the issue of shares and R109,54bn the value of shares repurchased. The repurchase programmes of Prosus, Naspers and Glencore account for most of this value, while the aggregate value of Richemont’s issue of A shares (conversion of depositary receipts) was R196,56bn.

In March, the International Monetary Fund cut its growth forecast for SA to just 0.1% for 2023, warning that the country risked economic stagnation unless it acted with urgency. The solution for economic reforms to tackle fiscal and structural challenges, and so boost growth, is to involve business. The longer it takes for this to be realised, the greater the risk of further deterioration in business and consumer confidence and levels of fixed investment.

DealMakers Q1 League Table – M&A activity by the top South African advisory firms (in relation to exchange-listed companies).

DealMakers Q1 League Table – General Corporate Finance activity by the top South African advisory firms (in relation to exchange-listed companies).

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