M&A activity halves in SA, dim outlook for jobs
Merger and acquisition activity has nearly halved in South Africa in 2009, with deal value falling 46.9% to $3.4bn in the first six months of the year from $6.4bn in the same period of 2008. The fall in the number of transactions is even more pronounced, with 28 M&A deals done compared to 80 last year: while volumes have contracted sharply, the value of individual deals has increased.
The energy, mining and utilities sector has accounted for most of the activity, followed by real estate, according to a new report by Mergermarket, an information and analysis provider.
Deutsche Bank has leapt to the top of the rankings as financial adviser with three deals worth $1.6bn, according to Mergermarket. The German bank was closely followed by Goldman Sachs and UBS Investment Bank in joint second place. Nedbank Capital was top of the volume tables with four deals, while Edward Nathan Sonnenbergs was top of the legal adviser tables.
The decline in the number of mergers and acquisitions in SA closely follows global trends: M&A values were down 66% in the first six months of this year. However, there are signs of a pick-up now: M&A-related mandated have increased in the past two or three months and South African financiers and advisers have become more active.
"We are seeing some big deal values and some advisers like Goldman Sachs dominating the league tables," says Elaine Green, deputy editor of Mergermarket. "In South Africa we are expecting to see a couple of big deals happen."
Foreign firms rule the field, but their dominance does not translate into new jobs. "US or European investment banks have a hiring freeze on because head office abroad imposes a blanket freeze. Their hands are tied, regardless of how well they may be doing in South Africa," says Bruce Eccles of Executive Search d'Afrique, a boutique headhunting firm in Johannesburg.
He adds: "Local banks have more room for manoeuvre and are likely to start hiring as M&A activity picks up towards the end of the year. South Africa took longer to be affected by the crisis and I believe will come out of it earlier."
