M&A Feature - Introduction Quarter 1 2021

By MYRLE VANDERSTRAETEN, Published in M&A FEATURE

South Africans waved goodbye to 2019 with some relief; business confidence was at a low point.

And then COVID-19 hit South African markets already struggling to overcome a stressed economy; considerable political uncertainty; local and global business partner concern about the country's apparent inability to overcome bribery and corruption challenges, and the general perception that justice would not be served; high unemployment and labour issues; over-regulation; a volatile and weak rand; worries about land expropriation without compensation; and a government that constantly turned to the private sector to bail it out.

Marylou Greig, editor of sister publication DealMakers, writes that the value of M&A activity in 2020 was down by 40% off 2019 values (R336,9bn as against R540,48bn) and that the number of deals concluded was down 20% (393 against 488).

Distressed M&A opportunities saw DealMakers introduce the Business Rescue Award at the 2020 Ansarada DealMakers Annual Awards, held virtually in February.

Globally, it was the telecoms and tech sectors that saw interesting deals. Experian Business Research reported that despite an overall decline of 30% in deals over the first nine months of 2020 – their lowest recorded figure since the same period in 2009, which came in the aftermath of the financial crisis – in the UK, deals in these sectors were valued at £186bn, up from £151bn in 2019.

In the US, M&A activity was reported in the food delivery space. The merger between GrubHub and Just Eat was valued at $7bn.

Words that are currently used to describe the requirements for deal activity are agility, flexibility and vision. There may be deals that bring to mind the expression, 'he who hesitates is lost' and, globally, many deals were put on hold as management postponed their investment decisions. However, in our uncertain world, it will be those who can make strategic acquisitions that take account of their existing success, combined with a vision for the needs of a somewhat different future than may have featured pre-COVID- 19, who are likely to be most successful.